What is the greatest financial lesson you've ever learned?
You're a monkey. It all comes down to that. You are a slightly clever, pants-wearing primate. If you forget that you're nothing more than a monkey who has been fashioned by eons on the plains, being chased by tigers, you shouldn't invest. You have to be aware of how your own psychology effects what you do. This is why we as investors sell at the bottom, get panicked. All the other lessons I've learned have come out of that. As has the field of behavioral economics.
Wall Street clichés, like "cut your losses and let your winners run" come back to prevent the monkey part of your brain from doing what it does. There's a banana–I want it. That's how chimps behave. Us humans react to greed and fear in predictable ways. We are predictably irrational. If you understand that you can take steps to prevent that–we don't own anything in the office that doesn't have a stop-loss on it. In 2008, we watched the market go down 40%. We figured out we're chimps, and don't let the chimp inside us make those chimp-like decisions.
Every good financial decision I've made comes from, "Wait a second, monkey boy, step back, don't do that." Once you realize how your own brain chemistry works against you, it gives you a chance to not panic at the bottom.
In response to a few commenters noticing that he may stir up controversy with his bald-faced statements about (gasp!) evolution (embarrassing that this should still be controversial in the greatest and most scientifically productive free market of ideas and capital on the planet), Ritholtz responded:
Sorry, but I won't bite.
As far as I am concerned, if you do not understand the theory of evolution, and its place within the scientific methodology, then you are a clueless idiot. Debate over.
This is not a debate. This is not an opinion. Evolution is the single best scientific explanation for how we got here.
I look at the global warming deniers as primarily misguided dipshits who don't understand math. And if you can prove me wrong mathematically, I will happily reverse my position. Until then, you are just pawns of Exxon Mobil. (I prefer BP or Chevron for my hi-test)
But the anti-evolution people are simply clueless f*ck 'tards.
Everytime some State bans the teaching of evolution, I put them on my BUY NOTHING/HIRE NO ONE from them list. If you insist on imposing your ass backwardness on everyone else, then there needs to repercussions for those actions.
I have zero tolerance for Anti-science, Anti-math blowhards.
Hey. His words, not mine.
As a conservative, I have a deep love of mushheads being publicly told that they're mushheads in no uncertain terms. Ergo, I love Barry Ritholtz.