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Here on Reel From The Real, i write what i’ve learned in investing x personal finance.
My goal is to:
share optimistic and positive energy - because the hustle is real x rough enough
personalise personal finance that bit more.
😎 To your wealth,
Aila Obiocha
The concept of the ‘Rational Man’ in economics and finance says that we take the information we have, and use it to make independent choices that give us the greatest benefit. We are logical calculating machines who know what we want, why we want it, and how to let the necessary occur.
Let’s set aside the idea that my university owes me at least a partial refund for teaching me this complete toss, handing me a first class degree, and letting me out into the real-world, hanging on to the severely misguided idea that:
a) rational people exist,
b) I am one of them,
and
c) we are rational when it comes to money.
People aren’t rational.
We are not thinking machines.
We are feeling machines - that happen to think.
- Peter Watts
Here’s what I discovered when I started investing: few of us are at all rational, fewer still are absolutely rational, and nobody, I repeat, nobody is consistently rational. Especially not when it comes to money. Not a single person in this world.
Virtually every investor (yours truly included) has suffered the disposition effect i.e. selling our winning stocks / projects / cryptoassets and keeping our losing stocks / projects / cryptoassets as beloved pets in the trading portfolio. Some of the reasons people give for making investments are so irrational, I can’t decide between laughing in amusement and laughing in despair.
This irrationality does not only play out in the investing space, but in virtually every situation in which a financial transaction can occur. For example, I have seen taxi drivers argue with customers about receiving 50% of the agreed price for a cab ride, and, in disgust, throwing out the 50% that they had actually been paid, and raining generational curses in the air on the customer as they shake their fists and zoom off in annoyance (it’s a Middle East thing 🤦♀️), unaware that they have now lost exactly 100% of their money
the initial 50% through miscommunication and/or poor negotiation, and
the final 50% through infusing the money with their feelings, rather than injecting it into their wallet.
“If you know the enemy and know yourself,
you need not fear the result of a hundred battles.
If you know yourself, but not the enemy,
for every victory gained you will suffer defeat.
If you know neither the enemy nor yourself,
you will succumb in every battle.”
- Sun Tzu
I remain amused at people who complain about the “fairness” of business negotiations or investment transactions, when they are clearly outnumbered, outworked, and underprepared compared to the other side of the table. If you have not done the work required to win, why should the other side leave anything on the table… for you?
Why should you win at all, or even lose gracefully?
Economics talks about ‘Rational Man’, but really, it’s money that’s rational, not us. Money just... is. Money does not know who we are, why we exist, why we want it, and what we are willing to do with and for it. Money doesn’t know you, doesn’t believe in you, and feels absolutely nothing about you.
You either get it and keep it, or you don’t get it and keep it. Money doesn’t care how you feel when you are making or losing it, managing or spending it, and multiplying or destroying it. Money doesn’t care if you did your homework before investing, or if you chose to learn by consequence. Money will not come simply because you anticipate it, neither will it grow simply because you expect it. By now, a lot of crypto folks have learnt that number does not always go up. Even your hard work may not be enough to guarantee Money. You can work hard to get rich, become financially free - and still die poor. It happens, it happens frequently, and it can happen to you. Believe.
“Not all success is due to hard work,
and
Not all poverty is due to laziness”
- Morgan Hounsel
Sometimes, we can get wrapped up in philosophical notions about money: what peace and happiness it may or may not bring, whether or not it matters, and how much, and and aaannnd once again, money does not care about any of these things. It does not care if it ever enters or completely escapes your life, if it brings other things or if it comes empty-handed. And whilst we are in the spirit of being perfectly honest, Money does not care about the things that it takes from your life - including your life. Should you perish in the pursuit of Money, let me assure you that Money will not notice, will not say a kind word at your funeral, and will not put flowers on your grave.
Please save your feelings for your family, your friends and your loved ones. Save them for topics like philosophy, theology, and politics, where your feelings actually matter, and really do make a difference.
As for Money - make it, manage it and multiply it - or don’t.
Either way, stop catching feelings for it.