In the 1987 US finance movie titled Wall Street, corporate raider Gordon Gekko pronounces to a room of people that greed is in fact good. He argued that greed often is the means of progress and by indulging in one of the seven deadly sins, that the individual and civilization is better off for it in the long run, even at the expense of one’s own morals and values. Well, I know for myself that greed is absolutely not good, and I will share my personal story in the stock market as to why.
The story
Mature people act on character, not feelings. I acted on the feeling of greed, not character grounded in principles. I blindly chased wherever I could to get any kind of gains, with no regard for safety. This led me to buying speculative stocks of businesses that were falsely disguised as investing but was really high-risk gambling. Moreover, in the bull market, everything went up, and the speculative companies appreciate even quicker, which led me to buying those companies even more, even as the valuations reached titanic valuations. I ignored risk and focused only on reward. Initially it led to extreme gains. In a very strong market day, I would make the equivalent of an average person’s annual salary in just one day. This was an exhilarating feeling. If a psychologist had measured me, this effect might have been akin to taking strong drugs. This really messed with my head, and made me think I was far smarter than I actually was. There is a difference between being lucky and being skilled, and I confused the two and claimed it to be all skill. I even read the annual reports and financial documentation, put in some numbers on spreadsheets with confirmation bias so that the spreadsheet returned the result I wanted to begin with, all in an effort to delude myself that I was conducting proper “due diligence”. As the saying goes, it’s easy to fool people, and the easiest person for us to fool is really ourselves. And with a roaring bull market with zero interest rates, every successful trade only added to my delusional confidence, leading me to take more and more insane risks, while constantly being rewarded for it. As the old saying goes, all good things come to an end. Before it ends, bulls make money, bears make money, but pigs end up being slaughtered. I ended up being a greedy pig, not selling and being punished for it when the market crashed, and heavily for small caps and speculative stocks.
Why it happened
Anchoring bias; I was not willing to sell until I reached a certain dollar value. In reality, investable assets should be sold when they have exceeded intrinsic value or approximate market value, at least to some %. I had set a false arbitrary number to unload positions at. This also contributed to a hand in hand black and white thinking; either selling my entire position or not selling at all. In reality, a multi-pronged approach would have been smarter, slowly selling and taking profits at each step of the way of a wild orgy bull market.
Overconfidence bias; good old-fashioned ego gets in the way. Looking back now at myself and virtually all young people, it seems life is lived entirely on ego. Our actions and reactions all seem to be based on the monkey mind ego taking control and acting on our behalf. It seems ego is prevalent until it gets destroyed. The earlier on, the better, as the stakes are so much lower and there are less people that suffer the fallout. Better to fall and get hurt in skiing on the beginner’s bunny hill than to crash and get killed in a black diamond dangerous slope.
Perceived burden of performance: we are living in a world of seemingly total performance culture in the lenses of viewing men, where the burden of performance rests on men’s shoulders to perform and succeed in every way possible, be it physically, financially, socially, emotionally, spiritually, everything. I caved in to this pressure of needing to succeed to be seen as worthy, much less anything else. I equated one’s self-worth with success entirely. I thought it was family, friends, acquaintances and society that made me make this decision, with this unconscious undertone. But in reality, I was looking for someone to blame and cast as the scapegoat. As I was the one who made all the decisions, my hand was not forced. My own sinful desires led me to my own manufactured disaster, all in the process of trying to seek validation. Even though I didn’t tell anyone, I still felt the effect of that level of illusionary gains.
Likeminded people around; you are the average of the five people you spend the most time with. An old cliché, but turns out to be true, and in some instances, disturbingly true. Long term studies have been done by psychologists trying to predict what an individual is like without even knowing them. The trick is they were given access to the 5 closest peers to them, but were not allowed to ask those 5 peers about that person specifically. The psychologists ended up predicting what that individual was like with alarming accuracy. The strategy was they would essentially take the average or median of every category of life and use that as the guess; if that wasn’t close, they would take the entire range and estimate that the majority of the time the individual fit in that range. This worked with stunning success. For instance, the psychologists predicted the 6th person’s annual salary by guessing the mid point of the 5 individuals close to them. This even worked for the number of times the person exercised, how many vacations they took, and even whether the person got married, had children, or been divorced. Just by looking at the others, they just used the same answer for that person. The answer ended up being correct a large majority of the time. I also was no exception to this rule. Having friends in the same boat, with the same mindset, same foolishness, same lack of awareness or perspective, this only increased this greed indulging behavior. The worst part about friendships in today’s soft generation is everyone is scared to say anything negative; this leads to a false circle jerk delusional effect, where everyone is telling everyone in the group how amazing they are, equating the positive relationship to the actual ability of the other person. I had a situation where we were all falsely hyping each other up, and all 4 of us ended up being destroyed for it, led down a dead end with nowhere to go. It would have been better to have told the truth and momentarily hurt someone’s feelings, as it would have prevented a far worse outcome.
As the Bible said, those who have exalted themselves will be humbled, and those who have humbled themselves will be exalted. I definitely know I exalted myself in thinking the four most dangerous words in financial markets: “this time is different”. Sure, history doesn’t exactly repeat itself, but often times rhymes, according to Mark Twain. All I know is that disaster is pretty similar no matter where you are or what era you are in. And now, I have been painfully humbled. I am not sure what it means to have humbled themselves and to then be exalted. I guess we’ll see what happens.
Pride besets the fall. As Count Dooku had once famously said in Star Wars, “twice the pride, double the fall”. I didn’t realize it at the time, and wish I did, but pride had essentially blinded me entirely. I was wearing rose colored glasses when examining myself, with hubris and an entirely false appraisal of myself. That fall has been immense. Since then, I’m now apprehensive of feeling pride, even in situations where it could be deemed a valid emotion.
Now I know why Charlie Munger refers to those with the correct temperament do well. I wish I knew this sooner, but I guess we are old too soon and wise too late. It was clear I didn’t have the right temperament at all at the time. Imagine being made a king at the ages of 18, 23, 28, and every five years in age until death. If you were to measure the response of said person at every age, I’m guessing the response would change as the person became older. Particularly, one would likely have become humbler as one grew older. For myself, starting at age 18, my emotions towards being made king would be pride, arrogance, and would probably shift towards accepting responsibility, trying to be a leader while becoming older. And still then, years later it could shift towards humility, gratitude, servant leadership for others. Towards old age one might even end up fearful, cautious, nervous of this level of power and status, and maybe even reject the offer of being king altogether. Such stories in popular culture, literature is trying constantly to warn of this. Although it’s better to learn vicariously from the stories of others, some lessons of wisdom must be gained through painful experience through the test of life. Had I not gone through this experience, I would still be eagerly jumping at the opportunity to be king pompously in enthusiasm. Now, I would have an attitude of serving others and cautiously using that power, judiciously and only when necessary for a greater good.
Those old king stories of not giving the sons everything, and only doing so slowly in life, until they had reached certain ages and milestones, it is clear why that is the case. I had so much money on paper in my early and mid 20s, it went way over my head and completely messed with my thinking, emotions, mentality. It has all washed away. In an increasingly narcissistic society, I am not sure anyone has the temperament to be able to handle it all in their 20s.
My mind really wasn’t clear at the time. The mind is like water. When it’s turbulent, it’s difficult to see. When it’s calm, everything becomes clear, according to Prasad Mahes. A calm and clear mind would have easily avoided the temptations of greed.
The fallout
It made me at first very upset and anxious, but now calm. Those unusual peaks and valleys, highs and lows, I guess has made me tranquil and serene now. People that I meet now actually comment on this. I guess it’s like someone experiencing the very best and the very worst. Unless something can come similar, those emotions are tough to trigger again. It’s almost like a drug addict; they cannot feel anything with a low number of drugs as they have built up such a high tolerance from so much use. I’ve now experienced in my own life that level of perceived extreme win and loss, that any other gain or loss would be unlikely to faze me. Now it is hard to get triggered by anything, and I find myself not reacting to situations that would have triggered me previously. It also led to a higher level of enlightenment, akin to what Guy Spier had experienced from his greedy and easily impressionable days in his 20s. Perhaps along the lessons of Buddhism, where material possessions are but temporary and fleeting. They would create great works of art slowly over a long period of time, then after a moment of self-indulged examination in the art, the monks would discard the beautiful work instantly. That is how I view wealth now. After taking a step back and viewing society, particularly Western society from a bird’s eye view, it really seems that our society is addicted to money and status. I’ve now found money is the most overvalued asset in our society; Mark Biernat.
One passage of the Bible says, what does a man gain if he has gained the world, but lost his soul? One unfortunate piece about life is that life is understood backwards, but can only be lived forward. Looking back, if I had done everything correctly, I would have made lots of money but would not have grown character wise. The lack of self-awareness and autopilot mode disturbed me and made me realize that I could never again live in the moment, on monkey mind, blinded by idealism. Imagine finding someone else in life hard to deal with and even harder to live with. The solution is not too difficult, just remove them from your life. But what happens if that person is yourself? How do you just “remove yourself” from your own life? That could lead to a dangerous amount of self-hatred, self-loathing. The only way would be to change the self entirely.
It looks like Warren Buffett was right, that only when the tide has gone out do you discover who was swimming naked. Worst of all was that I thought everyone else was swimming naked and that I was the exception to the rule, when really, it was the other way around. It’s hard to have the same level of confidence as before, and now I carry around more of a beginner’s mindset rather than an expert’s mindset. Strong opinions that were strongly held, are now strong opinions that are loosely held.
Mohnish Pabrai likes the quote “when wealth is lost, nothing is lost. When health is lost, something is lost. And when character is lost, everything is lost”. I didn’t really feel that I lost anything as it was just some wealth. Perhaps it led to a stronger resolve to have a more resolute level of character going forward.
Conclusion
I am not sure all that has changed too much aside from many internal changes on the inside. The world will continue to operate the way it has, human nature is largely the same. I guess those who best resist our own sinful natures will end up being the best for it.
Disclaimer
This is not Financial Advice. This article is meant only for educational and perhaps entertainment purposes. Given the loss, it would be better to consider this the opposite of financial advice.