Wise Money: Self Serve

Quote to Ponder

“Everyone’s time is finite and shrinking. The highest leverage you can get with your money is to buy someone else’s time. Hire and outsource when you can.” - Kevin Kelly

Insight

A few years back, I (Bjorn) casually picked up a children's book from my shelves to read to my kids. The title and author didn't matter; I just thought the pictures would entertain my three-year-old.

As I began to read, I found myself immersed in a deeply moving story about a man's journey through life, encountering different versions of himself at various stages. The realization that it was all the same person at different points of life struck me, and by the end, a few tears fell as I acknowledged the brilliance of the author.

It's astonishing that such a fantastic book lay unnoticed on my shelves. I felt a sense of duty to give this gifted author the recognition they deserved. Maybe a Facebook fan page or a website would do the trick. I wanted to buy all their books, spread the word among my friends, and make them famous. But as I turned the book around, the name that met my eyes was none other than Charles Dickens—the literary giant known as one of the greatest English writers ever. My grand mission to promote the underappreciated author was unnecessary. Dickens had already received his due.

I had two reactions to this revelation. First, a sigh of relief that I didn't have to create a fan page for someone already renowned. Second, an overwhelming sense of confidence surged within me. If I could spot a talent like Dickens out of countless books, maybe I had an innate ability to identify literary greatness. Perhaps I could be an agent, an editor, or even a publisher. Although, if I'm honest, I'm not entirely sure about the differences between those roles. Nevertheless, this experience fueled my ego, exemplifying what psychologists refer to as The Self-Serving Bias—the tendency to credit our successes to personal talents while blaming external factors for failures.

We've all likely experienced this bias, especially when it comes to investing. When we pick a winning stock, we attribute it to our genius, while conveniently attributing any losing picks to unpredictable macroeconomic forces. We remember thinking Apple would be a good investment, even if we didn't actually buy any shares. We may have heard about a fund manager and felt confident in their talents, even though statistically, the majority of managers fail to beat the market, and the ones who do often do so due to luck.

Because of our Self-serving Bias, it's easy to fool ourselves into thinking we have more to do with our successes than we actually did. As Richard Feynman famously said, “You must not fool yourself, and you are the easiest person to fool.”

I've met countless people over the past few years who became interested in stocks and picked some winners. In their own minds, they reached genius level, only to collide with reality in 2022.

Instead of succumbing to our biases, focusing on objective information and rigorous analysis rather than following hunches and biases will lead to better outcomes when making investment decisions.

Quote to Ponder

Recommended Links

Insight