When I was young and stupid, I made many of the common mistakes that young people make. I saved my biggest blunder for when I was mature and should have known better.
My Biggest Blunder
This blunder was in a league of its own. I suggested to my wife that we should invest a considerable sum in a relatively high-risk, biotech start-up. My initial reasoning was sound.
I had extreme confidence in one of the key players. We had known each other for a generation. His work had been published in peer-reviewed journals, and he had multiple patents in his field. I was counting on his expertise. In that field, my wife and I were as dumb as a bag of hammers. Yet the initial investment was within the bounds of prudent risk-taking.
With passing time, we put more and then more money into the venture. I was learning a lot, but I focused on my learning and lost sight of what I didn’t know. At my peak maybe I was like an elementary school student…with the notion of understanding quantum physics or how to stop cancer. Unfortunately, I didn’t seriously engage with unbiased experts who truly understood the reality and the risks.
No one deliberately misled me. They didn’t have to. I attended to people who benefited from our investment. I learned of fascinating science, financial intrigue, and machinations of the hyper-rich. Some of the dynamics were familiar to me. Unfortunately, I ignored my massive ignorance in other vital arenas of knowledge.
My prudent wife warned me about putting more money in, each time I did it. She reminded me of our agreement, “No more than x% of our wealth goes into any one investment.” She also has a people sense, not exactly intuition, but a keen awareness of truth.
I was distracted or maybe seduced by hope, greed, pride, and or glamour. Ultimately, we paid an immense price for my hubris. My folly cost us more than a decade’s savings. !%*+~ OUCH!
Folly and Hubris
Even with this vague account, you can probably spot several of my mistakes. Many come down to folly and hubris.
We all commit folly. Folly is going forward when we’re warned that the path is unnecessarily risky and there are easier, safer options. Barbara Tuchman’s The March of Folly cites many examples of powerful and smart people making massive blunders like stumbling into WWI when the result was easy to foresee. She cites the “wooden-headedness” of decision-makers. She defines wooden-headedness as “acting according to wish while not allowing oneself to be deflected by the facts.”
Hubris has been with humanity for thousands of years. Hebrew and Christian scripture tell the story of King Solomon, supposedly the earth’s wisest king as of his day. He wrote Proverbs, his collection of hard-earned wisdom. Scripture also reports that what he warned others to avoid were his follies, which ruined his house and took his kingdom from its peak to its destruction.
We all face choices. Some choices have a profound impact: which relationships to invest in and which to abandon, or huge financial investments.
Decades ago, when I played tournament chess, I noticed that more games were lost by blunders than won by brilliancies. As an adult you have wise practices: Some common ones are checking with wise, unbiased experts, trying to estimate the risk and rewards, questioning your assumptions, and risking only what you can afford to lose. You probably have several other similar guidance rules.
Now, here is the real point of this blog. …Shifting from decision guide to coach mode…
Important Things to Think About
Consider this question: When you consider breaking one of your rules or you move beyond what you perceive as risky, what has hooked you? Why are you doing it?
Look at your patterns. Recognize what draws you forward. Many of us do things without fully recognizing what motivates us. Some of our motives are noble, but others might destroy us.
Often these blog posts invite you to lead a life worth imitating. Recognizing your vulnerabilities and protecting yourself from them, or “putting a leash on our stupid” might be something for others to imitate.
What is your biggest blunder? What did you learn from 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.”
Click here and find out how Terry and his team can help you make the most important financial decision of your next decade.