I came to work today and all around me is about 6 inches of snow. The snow plows had barely begun plowing the streets. There are very few people out, but those of us who are out here can drive with somewhat of an arrogant flair, almost like we're better than everybody else. Of course, this is absurd. We're probably more stupid than the rest of you that stayed home. But something about our 4 wheel drive and our hubris tells us that we're smart, brave and invincible.
I hadn't gotten three blocks before I saw one of my compatriots stranded in a median that they couldn't drive out of. Evidently, they thought the laws of physics ceased to exist the moment they sat behind the wheel. And later on my way home from work, that stranded motorist could just as easily be me. But many of you who are warm and safe at home are abiding by a few basic principles:
I don’t take unnecessary risk.
I don't assume that I know everything.
I don't assume it's different for me.
And to be honest, you don't have to go to work, go to the grocery store, or run here or there, because you planned ahead. You have milk and bread. You finished all your work yesterday. You were prepared to wake up and drink an unhurried cup of coffee. Unlike yours truly, who left his laptop at the office and promised folks he’d get back to them first thing in the morning. (Let’s learn from this, Tim, shall we?)
It's amazing how similar this is to investing. Like an overzealous redneck with a new pickup, folks can come off of a bull market and live with their actions as if their life principles are:
Speculate to elevate.
I know something smart people don't know.
It's different this time.
But the prudent among us would chart a different course. First, to borrow a phrase from Morgan Housel, you don't risk what you have and need for what you don't have and don't need. But you also live with a sober understanding of your own limitations and biases. This wisdom allows you to take a measured approach, not just to your investments, but to Life in general.
It isn't to say that you don't take calculated risks. After all, for you business owners prior to exit, usually around 80% of your wealth is tied up in your business. This is not a risk free life. But it's precisely because you are this entrepreneurial that you choose to exercise caution, prudence, and wisdom in this and every other area of your life.
This is why we don't have a lot of clients coming to us to try to do spectacular tricks in the stock market. Not only do you understand the limitations of the market, you also understand your own cognitive biases, and work to guard against them.
You’re like the wise driver in a snow storm: You could set speed records on the way to the grocery store. Or you could just watch the rest of us demonstrate with our folly the wisdom by which you govern your life.
Good call.