The Trouble with Being Rational
The reason to be another guy with a newsletter/blog/whatever-you-call-it
I invest for a living and for some wonderful people.
The job and ideal are simple: be rational and prudent and get to a better place. More safety and financial cushion, real returns over time, piece of mind. No kidding, right? All of this is table stakes, or should be. Yet, you look at what’s done in pursuit of this, what do you see?
Probably, a lot. A lot of action, advice, promises, and plans. We see a multitude of diverse opinions in newspapers, cable TV, and the internet. Buy this, buy that. Six mutual funds with great income. Overweight tech, underweight industrials (note to self to address the overweight/underweight absurdity sometime). There’s never a shortage of “good,” actionable advice or confidence. (Notice how almost no talking head on CNBC or Fox Business ever seems to hold even a shred of doubt.)
Investing is hard—simple but hard. Professionals know it’s hard. The client who hired a professional knows it’s hard, which is why she’s paying large sums of money to manage her money. Investing is hard for anyone but the true believers in the Warren Buffett/Jack Bogle religion preaching that all one has to do is “buy the market” and go to sleep, because stocks only go up over time. (There will be a lot on this topic in the future, believe me.)
The difficulty in investing hasn’t been reduced much in the Information Age. Rather, it has probably gotten harder. A connected world where information is free and available and billions of people can teach and learn is wonderful in so many ways. Yet, we also are increasingly aware of the costs: tribalism where people only consumer information and opinions that confirms beliefs already in place; too much information (and misinformation); and changes in the body and brain—more sedentary lifestyles, higher dopamine dependence, higher anxiety, less attention span; and on and on. These affect us all.
The Information Age has brought a cruel irony: It’s getting harder to think and act rationally.
It’s therefore harder, in many ways, to accomplish what you want to accomplish—and that’s a big problem for me.
The difficulty has something to do with our biology and evolution. We are here because our parents, their parents, and so on, made it. They got by, somehow. Humans, like all new species that randomly mutated from something else not the exact same species, had to survive or die off forever. They were not particularly fast or strong. They had weak senses—smell, hearing, eye-sight. Their young were completely dependent on others for care and survival for a long, long time relative to other species. Their bodies required large amounts of calories.
But humans survived and multiplied. We know this was due to a rather unique brain that developed, a brain that could remember, identify, and communicate various kinds of information. And make plans. Despite their physical limitations, humans nonetheless became good (or good enough) at dealing with the problem virtually all species face: scarcity. “Survival of the fittest” is wrongly interpreted to mean the strongest and best survive and thrive. But that’s not it. The concept is really about making a living. The “fittest” are those that are fit to live and that make it somehow. They are fit for their environment, survive, and pass along their genes.
I digress. Scarcity is not our problem today. In fact, much of what ails us might be a result of humans not being good with plenty. People today are overfed and increasingly obese but undernourished. People have endless amounts of information at their disposal and the benefit of all humanity’s lessons and discoveries, yet we are not smarter or wiser. (If you doubt this, just think of what’s coming out of high schools today.)
The difficulty with plenty is even more apparent when it comes to money. A shockingly high percentage of those receiving large windfall-like earnings—lottery winners, NFL first round draft picks—quickly end up broke and less happy and healthy than before their payday. And like with high school students, each generation isn’t getting better at their finances (and that’s being generous).
All the while life and the world is moving faster. Competition is getting harder. There’s so much changing—and so quickly.
That’s why it’s important today to think rationally. More than ever.
The trouble with thinking rationally, though, is that it’s getting harder to do. We know this, of course. We’re busier than ever, commuting, working, parenting, consuming, and even wasting. We spend and waste more time on screens: constant email and Facebook checking, Netflix binges, whatever your digital vice may be. (Mine: Twitter). Many of us are losing the war, or at least it feels like we are.
It does for me. And that worries me.
I want to make being rational a process, and like anything hard and important I’ve ever taken on, I have to attack it. Attack or there is little chance for me. This newsletter/blog/whatever-you-call-this is a primary weapon against the dark arts working against the rational. My Myers-Briggs personality type is INTJ. That means I love strategy and problem solving and finding a better way. We decide we are at Point A and want to get to Point B, and we figure out the best way to get there. I use to think that was everybody. Turns out people receive information and think differently. Some don’t care where we are going as long as we are having fun. Some want to assist. Some primarily care who’s around him and what they think about him. Some just really want to be in charge.
So what’s to follow are:
Ideas, specifically investment ideas. Writing helps me synthesize things and look for flaws. (I really want to kill bad ideas before they end up in portfolios. So, rip them to shreds. Find the flaws.)
Lessons and mental models. I should have been putting good ideas into a journal years ago.
Mistakes, my own and others. There’s so much to learn from mistakes, especially others’ mistakes.
Tips and hacks. Because we need all the help we can get.
Who knows what else?
While I’m doing this for a readership of one (me), I appreciate you reading and following. Just the thought others might see this helps me put in more effort and refine thoughts better. Leave feedback if you like. I’m always learning, so I appreciate any tips or tricks.
@RatherRational