The Investor Diary Entry #36: May 6, 2023
What’s luck got to do with it? The luck factor in investment is the concentration of the second chapter of the book The Psychology of Money.
The successful investors depicted in this chapter do not claim that they possess the luck potion, but they do realize that they way circumstances have been formed to forge their success is not all due directly to their efforts.
This a very tricky subject and I think one should read this chapter carefully, and pay attention to how this concept is being perceived.
The Good Luck Potion
If we go back to the three circles explained in the book The Seven Habits of Highly Effective People, we see that there are three circles; the circle of control: Where our efforts have a direct effect, the circle of influence: where our actions can only have an indirect effect – if any, and the circle of concern: where our actions have no effect what so ever on this area unless if we apply the butterfly effect theory.
If we apply the analogy of the universe and stars, for something to go right our efforts need to be directed in a way that is does what it needs to do with the area of control, and it is also in harmony with the events happening in both, the area of influence and that of concern.
Therefore, the successful investors need to have control over their mindset, and one of the ways that they do it is by acknowledging that the credit to their success cannot be given only to the direct actions or decisions that they have made, but also to the circumstances that were beyond their control that helped to get the outcome that made them successful.
The Psychology Of Money, in this chapter, draws the relationship between risk and luck.
The Bad Luck Potion
Now, this is the tricky part. If every successful story is tied to the luck potion, can we say that every unsuccessful story is tied to the bad luck potion?
By Logic, yes it is, but does this notion help our mindset to move forward? We mentioned in the good luck potion that successful investors use this notion to help them improve their mindset. Meaning, that they are being careful not becoming overconfident with their success.
We all know that just the same as the lack of confidence brings a shaky hand to every decision, overconfidence brings a hasty mind to those decision.
The good luck potion is used as a mental safeguard against overconfidence, but playing the bad luck potion to every unsuccessful story is simply being in denial of any personal responsibility.
The Good Use Of The Bad Luck Potion
Still, there is a good use to the bad luck potion. Many of us play the blame game against ourselves. We lash ourselves for every bad outcome which will gradually make us surrender.
If we think that we did our homework and directed our actions according to the information that we had at the time of the decision, then we have done our part regarding the first circle of control. This when we can bring in the use of the bad luck potion.
We also need to see if there is anything that we can learn about the events that happened in the areas of influence and concern, that can teach us something for future decisions.
The Luck Factor
Yes, there is something called luck in life. Being at the right time and place is not all luck, but there is a luck factor playing. In Every outcome, the luck factor is playing. Regardless of what the outcome was.
We can add a some more complexity to the matter, not every good outcome turns out good, as there are some good outcomes that might drive other bad circumstances. We can draw the same complexity on what we perceive as bad outcomes as well.
Conclusion
Preparing our mindset is essential to anything in life; attending school or college, career, relationships; whether romantic or otherwise, parenthood…etc.
As Warren Buffett indicated, the one investment that you are sure is not going to lose, is investing in yourself. Understanding that not every success is owed to our efforts, or at least not owed only to our efforts. Accordingly, not every failure is totally our responsibility.
My last statement here is about the perception of success and failure. Those two terms are governed by cultural and social effects, and they are also governed by personal values. The meaning of success or failure can altogether be defined differently. In the book Richer, Wiser, Happier, there are a lot of examples that talk about this concept.
The Investor
Saturday 6 May 2023
About The Author
I started to look into individual stocks in January 2022. I created this diary initially for myself to track my investing progress, and second as a place that I can share my ideas publicly hoping that others will share their ideas and learn from each other, and lastly as an online business where some links that I share are affiliate links, and if anybody bought anything by clicking those links I will get a commission based on that successful sale, which of course will not affect the price that you are buying the product or service at.
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