The Art of Being Rational by Dubrovina Oxana

Author:Dubrovina, Oxana
Language: eng
Format: epub
Publisher: Oxana Dubrovina
Published: 2019-11-24T00:00:00+00:00

Benjamin Franklin. When in Doubts Don’t

“And deprival super-reaction syndrome comes in: you are going to lose the whole thing if you don’t put in a little more. People go broke that way—because they can’t stop, rethink and say, ‘I can afford to write this one off and live to fight again. I don’t have to pursue this thing as an obsession—in a way that will break melxxxiv.’”

Peter: “Well, that is very interesting, your thought about denial. But don’t you think a part of investing is that over optimism is a huge problem as well. Do they connect one to another?”

Charlie: “About three centuries before the birth of Christ, Demosthenes, the most famous Greek orator, said, ‘What a man wishes that also he believes.’ Demosthenes, parsed out, was thus saying that man displays not only simple pain-avoiding psychological denial but also an excess of optimism even when he is already doing well.

“The Greek orator was clearly right about an excess of optimism being the normal human condition, even when pain or the threat of pain is absent. Witness happy people buying lottery tickets or believing that credit-furnishing, delivery-making grocery stores were going to displace a great many superefficient cash-and-carry supermarkets. One standard antidote to foolish optimism is trained, habitual use of the simple probability math of Fermat and Pascal, taught in my youth to high school sophomores. The mental rules of thumb that evolution will deal with risk are not adequate. They resemble the dysfunctional golf grip you would have if you relied on a grip driven by evolution instead of golf lessonslxxxv.”

Peter: “Well, all right, all right, Charlie; this is really interesting. I see I used a very stupid expression when I called you a total materialist. I just did it…to test you. As it seems now you are a big expert on human psychology. Treat it please as if it were never said. If I happened to offend you, please forgive me. Sometimes I myself am afraid of what I said to others. I have read very passionately your speech on ‘The Psychology of Human Misjudgment,’ and you know what my favorite part is? It is the part where you described these dogs under stress conditions. So all people, traders, who are working under stress conditions are like a dogs? Moreover, this is a very correct idea. This is indeed a brilliant one. I feel so much pressure working on Wall Street. You know it, and I am used to that. There is so much stress. We receive these calls from angry clients; the world is going to hell. I don’t realize whether it is night or day, and who cares? But at a certain point I realize that I couldn’t think at all; I am not able to think rationally. How should I behave these days? Sometimes it can be weeks like that. Pure stress. Sodom and Gomorrah—this is what happens on Wall Street these days. The folks who could keep themselves, like you and Warren, away from it are very intelligent value investors.

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