Our behavior when investing represents much of what plagues our greater lives – perhaps, therein, we can learn a thing or two…
In every financial transaction, there is a buyer and a seller. That means two different people have looked at the same facts and determined completely opposite verdicts. The same happens in our relationships, our businesses, our politics, and much more. Think of two deeply entrenched political parties, both analyzing identical facts and promoting bitter opposite policies. The reality is that our beliefs – not facts – drive our decisions. And this makes a lot of sense. How else would two smart people come to completely contradictory conclusions using the same information? I could see if this happened once or twice, but when it occurs time and again – day in and day out – throughout human history, one starts to notice a pattern.
Our childhoods, our experiences, and most notably our fears make our minds up for us, not the facts. Yet this is so difficult for us to admit. Conceding our fallibility – including how we twist the facts to appease our needs – means first looking at ourselves in the mirror and coming to grips with what we see. And we hate that, right? We deeply entrench ourselves in our opinions not because we are so smart and know all the answers, but because it is scary to acknowledge we are totally full of it.
For years, I have watched financial “experts” give their opinions as if they were fact, and I still cringe every time I encounter the lack of humility that is financial prognostication. Now I see it so clearly in our everyday lives as well. I used to tell people to look in the mirror and ask themselves, “Why do I like this stock?” Or, “Why do I like when someone forebodes about the economy?” Perhaps a mirror could help us in our businesses, relationships, and politics too.