More than 20 years ago we sold the home that we cared about and were deeply proud of. Three different real estate agents interviewed with us. Two told us what they thought they could sell the property for and we didn’t like the answer. A third agent told us what we wanted to hear. We hired her. She couldn’t deliver on her promises. Ultimately, we sold the home for less than what the first two told us to expect.
Everybody makes a mistake. I committed folly, because I was a professional real estate broker when we listed our home at my fantasy price. I should have listened to all the agents and evaluated their arguments and their evidence. I didn’t and Sandy and I lost thousands of dollars.
Everyone makes some unwise choices. We make mistakes. Folly is different. Folly is when you ignore evidence and wise counsel and plow ahead to make an unwise choice. Folly is often coupled with magical thinking.
Psychologists and anthropologists have sophisticated and nuanced definitions of “magical thinking.” My definition is simple. Magical thinking is believing that something good will happen for you because you want it to, despite the evidence.
My calling involves helping investors make the most important financial choice of their next decade. If you’re an investor you’re part of a small minority of the population. You probably have higher income, more education, fewer dangerous addictions, and greater emotional intelligence than most people. In other words, you’re above average in IQ, life experience, and financial knowledge.
I often talk with smart people who describe their intricate fantasies about how a rich fool will blunder their fortune away. Naturally, they think they will benefit.
There are occasionally rich fools who blunder wealth away. But the odds are quite long against being on the receiving end of a rich fool’s blunder. It would be like winning the lottery.
Yet every month wealthy people spend time effort and energy hoping for big scores. The tragic reality is that each month investors gamble million-dollar assets on far worse odds than the casinos’ slot machines.
Prudent people consult multiple wise counselors, especially in high stake situations. They choose their advisors carefully. There’s a chapter in Building Legacy Wealth on teaming up with a great broker and a post on “The 6 Qualities of a Great Broker.” They listen to the advice and evaluate the evidence.
Perhaps the most critical division between wise and foolish is how they deal with unpleasant information. Scoffers ignore it and often regret it. Wise people deal with the truth.
Whenever you’re making important choices, listen carefully, especially to a perspective that you don’t like. You need someone who will tell you what you need to know, especially when it’s different from what you want to hear.
A great broker will tell you the truth. How ready are you to hear it?
Terry Moore, CCIM, is the author of Building Legacy Wealth: How to Build Wealth and Live a Life Worth Imitating. Read his “Welcome to My Blog.”