We're doing a theme week on Industry Focus over the next five days on times we were wrong in the past. This segment digs into ways to react to mistakes, particularly in the investment arena. We also share a book recommendation for people interested in making themselves better investors and learning from mistakes.
A full transcript follows the video.
This video was recorded on Aug. 21, 2017.
Gaby Lapera: I think that what I would like to call this show is "In Defense of Making Mistakes," because ultimately, being wrong sometimes is good for you, as long as you react correctly. I think there are a few different steps to reacting to a mistake correctly. The first one is identifying what you did wrong, what your actual mistake was, and taking ownership of that, admitting that you made that mistake, and making sure that you're not blaming outside forces. Because sometimes stuff happens and you had no control over it. But acknowledging what you did have control over, I think, is super important.
John Maxfield: You know, when you say that, Gaby, you know what I think of? You know when you're driving and you see somebody do some crazy thing and you're like, "What is that idiot doing?" Like taking a U-turn in the middle of a road where maybe you shouldn't be taking a U-turn. But then, when that happens, you never think about those times when you've done that. And you never think about maybe he's in an emergency. You don't think about the reason or the explanation behind why he could be doing that. And this all comes down to cognitive dissonance, which is, we've talked about this on the show before, confirmation bias. These tricks and these games that our minds play with us that, to your point, you really have to make a conscious effort to recognize the mistakes that you've made. That point you made earlier about having an investing journal is so valuable. It reminds me, we have a really good investor -- well, we have a number of really good investors who write for The Motley Fool. One of them is Brian Stoffel, and I've heard him talk in the past through the years about having an investing journal and how much that adds and has made him a better investor. I just think that's such good advice.
Lapera: Yeah. To your point that you were getting at, I think there's a very famous Alexander Pope quote that probably everyone has heard, which is, "To err is human, to forgive is divine." Bottom line is, we all make mistakes, and as Alexander Pope noted, sometimes we have a lot of trouble forgiving others for their mistakes. I want everyone to take a moment to remind you that we're all human, and next time someone makes a mistake that affects you, try to think about the last time you made a mistake and how it felt, and how even though maybe you were doing it and you knew you shouldn't be doing it at the time, or afterwards, how terrible you felt, try and hold onto that feeling so that you can forgive other people for making similar mistakes and making other mistakes. Don't forget to be kind to other people.
Anyway, back to what you need to do when you've made a mistake. So you've identified it, you've admitted that you've made the mistake. The next step is to analyze why it happened, and come up with a plan for not making it again and again. This is where the notes that Maxfield and I were talking about earlier come in. It helps you figure out why you made that mistake. Then, the last thing that you need to do is work to actively implement that plan. Whether that starts with an apology or just an acknowledgement that you need to pay better attention in the future or whatever it is, you need to make sure that you actively work to respond to it, because ultimately, every time you make a mistake, it's an opportunity to better yourself.
I know I sound really hippy-dippy, feel good-y, but that really is what it is. You have the power within yourself to decide how you will approach mistakes, and one way you can approach it is to throw up your hands and say, "Well, I'm terrible and I suck and the whole world is awful and there's nothing I can do about it." The other way that you can look at it is, "It's an opportunity to learn and better myself and be even better going forward."
Maxfield: Yeah. Let me throw another quote at you, Gaby. I actually used this quote on the show that's going to air next week that we pre-filmed a few weeks ago, but it's very fitting for right now. I'm paraphrasing now because I don't have it right in front of me, but it's that confidence doesn't come from always being right; confidence comes from being comfortable being wrong. I think that's a really good point, because the fact of the matter is, even if you're right 99% of the time, like in the business that we're in, writing, if you're right 99% of the time, that means one out of every 100 articles is going to be wrong. That's an issue. Or that means there's going to be a tiny piece and a handful of articles that are wrong. Now, that's an issue, but if you're not comfortable proceeding with the fact, going forward with the fact that you're going to be making mistakes, and being willing to learn from those mistakes, it can really be a paralyzing thing and can really throttle your advancement. Then, one more thing that all this brings to mind is a Ryan Holiday quote --
Lapera: Oh, I love Ryan Holiday.
Maxfield: He's amazing! This guy is off the charts.
Lapera: Are you going to do Ego Is the Enemy or The Obstacle Is the Way? Because they're both great books, readers.
Maxfield: Yeah, both of them are great books, and both of them hit on this same thing. If you have too big of an ego and you can't admit mistakes, that's a problem. And Ryan draws all of this from his interactions with some of these top thinkers and business people in the country. The Obstacle Is the Way is the same thing -- if you're not willing to confront your mistakes and push through them, your advancement will be throttled.
Lapera: Yeah. Readers, I cannot recommend enough Ryan Holiday's The Obstacle Is the Way. I'm about to start Ego Is the Enemy. I just ordered it from Amazon. I've only read a couple of chapters so far, but it is as inspiring, if not more so than, The Obstacle Is the Way. If you're into stoic philosophy, it's going to be right up your alley. If that doesn't sound like it's for you, you should try it anyway, and if it's not, at least you learned something new, that you don't like stoic philosophy.