I’m Just Now Realizing How Stupid We Are

This is my 3,000th column. I've learned a tremendous amount in writing about investing and the economy. Here are a few of the big lessons. 

I've learned that changing your mind is one of the most difficult things we do. It is far easier to fool yourself into believing a falsehood than admit a mistake.

I've learned that people are terrible at predicting their own emotions. You will be more fearful when the market is crashing and more greedy when it is surging than you think. 

I've learned that strong political beliefs in either direction limit your ability to make rational decisions more than almost anything else.

I've learned that short-term thinking is at the root of most of our problems, whether it's in business, politics, investing, or work.

I've learned that debt can cause more social problems than some drugs, yet drugs are illegal and debt is tax deductible.

I've learned that finance is actually very simple, but it's made to look complicated to justify fees.

I've learned that self-interest is the most powerful force in the world. People in unethical, predatory, and nonsense jobs will do mental gymnastics to convince themselves they're doing the right thing. Those who criticize the behavior of "greedy Wall Street bankers" underestimate their tendency to do the same thing if offered an eight-figure salary.

I've learned that people are twice as biased as they think they are, which is precisely why biases are dangerous.

I've learned that unsustainable things can last years, even decades, longer than people think.

I've learned that those who think "it's different this time" are the four most dangerous words are wrong. It is always different this time, as no two recessions, recoveries, or market cycles are alike. What's dangerous is assuming the future will perfectly resemble the past.

I've learned that journalists' need to write far exceeds the number of things that need to be written. No writer can say to their boss, "There's nothing important to write about today," although it is the truth most days.

I've learned that no one cares how accurate pundits' forecasts are. Those who listen to pundits are most interested in having their own views confirmed. Accuracy is an afterthought.

I've learned that there's a strong correlation between knowledge and humility. People who spend 10 minutes on Google studying monetary policy think they have it all figured out, while people with Ph.D.s and decades of experience throw up their hands in frustration. The more you study economics, the more you realize how little we know about it.

I've learned that what looks like tomorrow's biggest threat almost never is. Most of what people worried about over the last five years -- inflation, rising interest rates, a double-dip recession, stagnant markets, Greece leaving the euro, a government default -- never occurred. The biggest actual risk for most of us was something few talked about: excessive pessimism.

I've learned that data can do more harm than good. There is so much data available today that you can convincingly prove almost anything by cherry-picking with industrial strength. This breeds confirmation bias, as people start with an answer then find data to back it up.

I've learned that a willingness to wait longer than other people is your biggest natural edge. If you can think about the next five years while everyone else is fixated on the next five months, you have an advantage that makes high-frequency trading, insider tips, and corporate loopholes look like a joke.

I've learned that we can't tell the difference between luck and skill. Out of millions of investors, a few will be phenomenally successful due to luck alone, yet no one is willing to admit they are one of the lucky ones.

I've learned that there's no such thing as a normal market or a normal economy. Some people spend their lives "waiting for things to get back to normal" without realizing that stocks and the economy are always in some state of craziness.

I've learned that when it comes to earning high investment returns, market volatility is like an entrance fee at an amusement park. But few investors want to pay the market's entrance fee. They'd rather sneak in the back door, hop the fence, and outsmart security -- all of which is stressful and likely to fail. At both the amusement park and in investing, they'd have a better experience if they just paid the damn entrance fee.

I've learned that Winston Churchill was right when he said, "You can always count on Americans to do the right thing -- after they've tried everything else." Congress is a basket case 99% of the time, but when things are truly at the precipice it gets things done.

I've learned that people's expectations grow faster than their wealth. The country is richer than it's ever been. I don't think it's as happy as it's ever been.

I've learned that how you reacted to past bubbles is a good indication of how you'll act to future ones. The same people buying dot-com stocks in 1999 were buying Miami condos in 2006 and gold in 2011. 

I've learned that "do nothing" is the best advice for almost everyone almost all the time.

I learned that Godwin's Law is totally accurate.

What about you?

Check back every Tuesday and Friday for Morgan Housel's columns on finance and economics. 

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Read/Post Comments (34) | Recommend This Article (211)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 11, 2014, at 5:12 PM, ejprzybylski wrote:

    I've learned that you're a good writer.

  • Report this Comment On June 11, 2014, at 9:48 PM, sagitarius84 wrote:

    I know I may have asked this before, but is it possible to see the complete list of all 3000 articles that you have posted on TMF?

    Thank you!

  • Report this Comment On June 11, 2014, at 10:01 PM, Artimus wrote:

    Same here Morgan,

    Anyway to have access to all your articles instead of just the last 50?

  • Report this Comment On June 12, 2014, at 3:41 AM, GETRICHSLOW2 wrote:

    I've now learned what Godwin's law is and I agree with your statement.

  • Report this Comment On June 12, 2014, at 10:17 AM, Turfscape wrote:

    Best headline to date!

  • Report this Comment On June 12, 2014, at 10:42 AM, dackerman21 wrote:

    Great Post Morgan. Love your articles.

    But, I completely disagree with this line :

    I've learned that debt can cause more social problems than some drugs, yet drugs are illegal and debt is tax deductible.

    It should read :

    Debt used poorly is worse than drugs, debt used smartly is a wonderful tool to grow one's net worth.

    Here's a few examples of how debt used smartly is a wonderful thing

    1)Henry Singleton (Teledyne) - Used debt many times over his 30 year tenure at Teledyne to buy back stock at very good prices. He ended up buying over 90% of his outstanding shares.

    2)Selim Bassoul (Middleby) - He used some of the cheapest debt in the world over the last 10-15 years buying up smaller companies. MIDD stock has gone from $5 to $250 in that time frame.

    3)Smart Real Estate Investors - Using debt to finance purchases of residential rentals/commercial space if the price is right and the interest rate is low is one of the best ways to grow one's net worth over the long run.

    Too many people are scared of debt and it's a horrible thing.

    But, otherwise, it was a blast reading your article

    Dave

  • Report this Comment On June 12, 2014, at 10:47 AM, TMFHousel wrote:

    Sure, debt can be used safety and effectively, but so can drugs. I don't know why we ban one and subsidize the other.

    Not sure how to access all 3k columns, but pretty sure you wouldn't want to anyways. The old ones are barely readable.

    Thanks for the comments, all.

    -Morgan

  • Report this Comment On June 12, 2014, at 11:54 AM, RNF62 wrote:

    Congratulations Morgan, on the first 3000! Great reads to get us thinking.

  • Report this Comment On June 12, 2014, at 12:15 PM, TXObjectivist75 wrote:

    Umm, cocaine and meth can be used responsibly?

  • Report this Comment On June 12, 2014, at 12:31 PM, alexf wrote:

    Wonderful article Morgan.

    I agree with the poster than cheap debt used to finance growth or investment in the future may not be a bad thing.

    The article is tops as usual. Keep up the good work!

  • Report this Comment On June 12, 2014, at 3:12 PM, TomBooker wrote:

    "I've learned that journalists' need to write far exceeds the number of things that need to be written. No writer can say to their boss, "There's nothing important to write about today," although it is the truth most days."

    Corollary: Explaining to a prospective Editor when you are writing and feel bored and uninspired, the piece is highly likely to be self-similar... isn't very productive in launching a late life career in journalism. ;)

    "I've learned that there's a strong correlation between knowledge and humility."

    I think there is a very marginal, but amusing aspect to knowledge.

    Had dinner at the home of husband and wife Psychiatrists. Dinner conversation went into a sidebar, when their 10 year old wouldn't eat her green beans. A parental debate ensued between our hosts. A final solution was deferred..

    No matter how much we know, a highly sophisticated discussion doesn't necessarily garner better or clearer answers in the every-day of the human adventure of which we all share..

    "I've learned that we can't tell the difference between luck and skill."

    I have held and added-to AMZN for 13 years. Mkt value and re-invested proceeds have grown to be more than 25% of my invested wealth.

    I will never really know if I was somehow a brilliant analytical LTBHer, or just dumb lucky because I was too stupid or lazy to find a better opportunity for the capital. ;)

    Forced to bet, I would go long the latter.

    which precedes...

    "I've learned that "do nothing" is the best advice for almost everyone almost all the time."

    Corollary: Life would be a lot easier, if we all would first effort to learn how to stay out of our own way.

    In investing, it goes double. ;)

  • Report this Comment On June 12, 2014, at 8:50 PM, wolfman225 wrote:

    One dispute:

    "It's different this time" ARE, in fact, the most dangerous words in the English language when they are spoken by those in government who continually advocate for a State-centric policy of economic and business controls. There seems to be no end to a Progressive's belief that, just because Communist/Socialist policies have never worked in the past, with them in charge, "This time it's different".

  • Report this Comment On June 12, 2014, at 10:06 PM, JacquesleFou wrote:

    Great column (as usual). So many commonsense ideas in here that I hate to take issue with one, but I'm afraid that my erstwhile hero Winnie may not be proven completely right when it comes to the 5 year-olds currently running our government. Hope I'm wrong - maybe they'll remember that their job is to solve problems, and not just to get re-elected.

    I think you're the foolest Fool of all. Keep up the good work.

  • Report this Comment On June 13, 2014, at 8:13 AM, EdV wrote:

    Morgan, regarding your lesson,

    "I've learned that self-interest is the most powerful force in the world".

    This reminded me of a quote from many years ago from a Jack Lang, former New South Wales Premier (Australia) giving advice to a young Paul Keating (former Australian Prime Minister in the early to mid 1990s):

    "Always back the horse named self-interest, son. It'll be the only one trying". Hence, the "most powerful force in the world".

    A favorite thought of mine is,

    "The bigger the hat, the smaller the property" (I'm sure a lot of readers here would have read of similar quotes).

    For those who drive expensive cars, I always wonder what their household balance sheet really looks like. There's a big difference in acting wealthy and actually being wealthy.

    Great article Morgan.

  • Report this Comment On June 13, 2014, at 4:32 PM, SkepikI wrote:

    I've learned that people in general and economists in particular mistake collections of observations for "data", mistake data for facts, and mistake facts for information. More often than we all imagine, collections of numbers are simply random observations that are made to look like information by application of statistical formulas.

    I've learned that applying statistical formulas to random numbers WILL give you an answer, when most assume that nonsense or randomness will result in no or a nonsensical answer from statistics. Worse than nonsensical, the answer will appear credible when it is simply WRONG.

  • Report this Comment On June 13, 2014, at 6:55 PM, huibs wrote:

    ..I've learned that you don't need to "giggle" the flusher on a toilet to keep it from running, but a slight downward push will pull the excess chain from under the stopper allowing it to seal..

    ..huibs..

  • Report this Comment On June 13, 2014, at 9:58 PM, ksk3888 wrote:

    Great Article !!!! Keep up the good work.

  • Report this Comment On June 13, 2014, at 10:03 PM, x1x2x3x4444 wrote:

    Hi. Liked the post.

    For the boneheads who have to *try* to prove they're smarter than the writer, this is what he actually said:

    "I've learned that debt can cause more social problems than some drugs . . . "

    not that debt is always bad; he just said it CAN cause more social problems than some drugs . . .

    so, in the future, spare us you're *insights*

    (to be clear I'm not talking about Mr. Housel's column, just some of the aftermath)

  • Report this Comment On June 13, 2014, at 11:45 PM, rrwwss49 wrote:

    Nice article - many of the comments I could personally relate to in my investing past. Pessimism can sure hold you back, when being engaged pays better,.

  • Report this Comment On June 14, 2014, at 4:00 AM, SuntanIronMan wrote:

    Wait a sec. You're JUST realizing how stupid we all are? Haha.

    Great article as always. Congratulations on 3,000. I look forward to reading 3,000 more.

  • Report this Comment On June 14, 2014, at 6:56 AM, famullar wrote:

    WARS have never helped any If the USA says we will not send tropes but will send the help that is the drones that will kill may collectivize without the precise and and that is a cruelty to kill all the innocents also

  • Report this Comment On June 14, 2014, at 11:37 AM, Peacedreamer22 wrote:

    Wow! Great insights and self awareness. I don't comment much on Fool, but I have printed your article so that I can refer back to it as a tool to make me a more Foolish investor. Thanks.

  • Report this Comment On June 14, 2014, at 3:33 PM, mendax wrote:

    This is the best article I've ever seen on the Motley Fool.

  • Report this Comment On June 14, 2014, at 10:46 PM, NailThatJello wrote:

    Brilliant. Buffettworthy.

  • Report this Comment On June 15, 2014, at 12:10 AM, colleran wrote:

    Morgan, you are the best. Keep the insights coming.

  • Report this Comment On June 15, 2014, at 11:38 AM, Minow wrote:

    Careful-Mr. Housel, you may possibly be your own worst critic!

  • Report this Comment On June 15, 2014, at 12:24 PM, TMFWysocki wrote:

    A terrific read, Morgan. You are a gifted writer and thinker.

  • Report this Comment On June 15, 2014, at 7:53 PM, kroked wrote:

    Most of what people worried about over the last five years -- inflation, rising interest rates, a double-dip recession, stagnant markets, Greece leaving the euro, a government default -- never occurred.

    -----

    I've learned that unsustainable things can last years, even decades, longer than people think.

    ------

    ಠ_ಠ

  • Report this Comment On June 15, 2014, at 11:30 PM, devinrhode2 wrote:

    Google search for articles by Morgan Housel on fool.com: https://www.google.com/search?q=site%3Afool.com+"By+Mor...

  • Report this Comment On June 16, 2014, at 6:37 AM, Dmartin888 wrote:

    Hitler? Who said anything about Hitler?

  • Report this Comment On June 16, 2014, at 12:43 PM, MaxPower13 wrote:

    "I learned that Godwin's Law is totally accurate."

    You know who else said that? Hit-- oh, damn, Dmartin beat me to it.

    Congratulations on 3,000 articles, Morgan! Keep up the great work.

  • Report this Comment On June 16, 2014, at 6:19 PM, Ensomaman wrote:

    Dunning–Kruger effect - I've learned that there's a strong correlation between knowledge and humility. Keep learning and know less :)

  • Report this Comment On June 17, 2014, at 1:00 AM, Ravenor wrote:

    Congrats, Mr. Housel! Please keep the brain food coming!

  • Report this Comment On July 18, 2014, at 3:07 PM, rraffety wrote:

    You're all a bunch of Nazis!

    (j/k, someone had to say it re: Godwin's Law)

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