Here is the transcript of the video. It explores self-knowledge for investment success.
In college, I was very inspired by Socrates’ advice, “Know thyself!” Indeed, I spent years attempting to do just that, chewing and digesting everything I could in philosophy, psychology, literature, history and every other subject. And I cavorted with gurus and holy men and with holy women. And I spent many an hour wandering through, fields and city streets lost in introspective contemplation.
Anyway, with a degree in philosophy, you’ve been educationally prepared to do… nothing or to do anything, depending on how you look at it. In any case, I wanted to gain some real-world experience, in something far afield of academia, so I ended up getting hired as a stockbroker, down on Wall Street. Go figure.
It can take a while to pass the Series 7 Exam and get licensed, so prior to my start date, I set out to read everything that I could about investing in the stock market. One of the very first books I perused was a classic, called, “The Money Game.” I remember coming across a sentence in it that blew my mind. The author said, “If you don’t know who you are, the stock market is an expensive place to find out.” Wow, there’s no getting away from Socrates’ advice to know thyself!
But how exactly does self-knowledge relate to success as an investor? Over time, it began to dawn on me. I’ll now reveal to you the secrets I discovered…
The Seven Deadly Sins of Investing
OK, what, then, does self-knowledge have to do with investing? For one thing, it means knowing one’s weaknesses. Indeed, when I worked on Wall Street, I often thought of my clients like the tragic heroes of Greek mythology; each had a fatal flaw. It was my responsibility to save each client from his or her fatal flaw. I mean that there would often be a particular emotion that was prone to overpower them. It could be, for example:
Yes, greed is obvious enough. It can blind one to the dangers involved with an investment.
Then there’s fear. Fear is often a product of ignorance. That’s why so many people find themselves selling when they should be buying. If they really understood a company, they would be able to endure the vicissitudes of its market price.
Then there’s what might be called “inordinate love.” That means falling in love with a stock, being too emotionally attached to sell it, as crazy as that may sound. There’s some nice examples of this in “The Money Game.”
Next is pride, another of the deadly sins. Pride often involves the inability to take a loss. For example, let’s say that you purchase your house for $2 million dollars. Well, it’s time to sell the house, but it’s now worth only $1.5 million. And so you decide to wait until it comes back to at least $2 million, before selling it. Of course, it may have to wait 10 years before it comes back or it may never come back at all. And so, in life we must learn to take your losses and to learn from them.
Another fatal flaw is sloth. It’s wanting something for nothing, and therefore refusing to do the often-laborious research involved with intelligent investing.
Then there’s the sin of myopia, which means failing to see the big picture, being too concerned with the next quarterly report, rather than with the long-term prospects of a company. Like prisoners tied to the wall of Plato’s Cave, they only see what’s on the wall, or on the news report, failing to see the big picture.
Failing to trust one’s gut is another one of the deadly sins of investing. Of course, you can’t just fly by the seat of your pants. You have to do research and analysis, if you’re going to be successful, but it’s also important to trust your gut, when investing. And I suppose that that’s true of all aspects of life. President Kennedy wrote that he had a gut sense that it wouldn’t be wise to invade Cuba, despite the advice of his advisors that he do so. He regretted that he didn’t trust his gut.
Those are some examples of weaknesses, or fatal flaws, that one may have as an investor. You should know what your weaknesses are.
But you should also know your strengths. Most investors don’t know what they are. For you see, there’s lots of ways to make money on Wall Street. Now it turns out that you might have an aptitude for finding companies that have a niche. Warren Buffet calls it a franchise. Other people like to find companies that are misunderstood and therefore devalued, or companies that are candidates for being bought up by a large company.
There’s many ways to invest, but you should find one that is most suitable for your personality. And, according to Peter Lynch, former director of the Fidelity Magellan Fund, you should invest in companies that you are familiar with. If, for example, you work in the fashion industry, you’ll probably do better investing in companies in that industry than you would with, for example, high-tech companies.
Therefore, if you wish to be successful in your investments, you should know yourself. And while there’s a great depth to what it means to know yourself, it begins with knowing what you’re good and what you’re bad at, your strengths and your weaknesses.
There’s a lot more involved here. For example, many people have what might be called a “money neurosis.” When it comes not just to investments — but to money and possessions in general — many people are what a psychiatrist, Dr. Edmund Bergler, called “psychic masochists”. They unconsciously punish themselves and make themselves miserable. There are countless examples of this self-punishment, among the ranks of famous entertainers, whose life ends at an early age, from fortune, fame and drug overdoses. Anyway, I’ve just touched the surface.
I can’t tell you what to invest in. I’m not a financial consultant. But I can help you to get it together emotionally, such that you do much better with money and investments. You can call or email me for more information. There’s a link here to one of my websites. I’ll look forward to hearing from you!
P.S. In addition to this website, I have another that you might find useful: www.platosattache.com
Mark Dillof
Dr. Mark Dillof is president of Sherlock & Zen, LLC, Business Consulting. In addition to extensive business experience — including having worked as a management consultant, stockbroker and executive coach — he taught philosophy and psychology for many years, wrote several books, has had a private practice as a consulting philosopher, and has entertained as a professional magician, among other things.