Am I right or wrong ?
comentada em 26/04/2019 16:13

The key to understanding how external losses become internalized lies in knowing the subtle differences between facts and opinions. The American Heritage Dictionary defines a fact as something that has been objectively verified. Facts are neither right nor wrong; they simply are. Opinions are personal assessments and are right or wrong depending on whether they actually correspond with the facts. Therefore, only opinions can be right or wrong; facts cannot. Right and wrong are inappropriate for the description of business operations and market participation, and so are the terms win and lose. Participating in markets is not about being right or wrong, nor is it about defeat; it’s about making decisions. Decision making is a process of reaching a conclusion after careful consideration; it is a judgment, a choice between alternatives when all the facts are not yet, and cannot yet, be known because they depend on events unfolding in the future. Therefore, decision making is not a choice between right and wrong. In 20/20 hindsight, decisions might be good or bad but not right or wrong. With regard to the markets, only expressed opinions can be right or wrong. Market positions are either profitable or unprofitable, period. But due to the vocabulary quirks outlined above, it is easy to equate losing money in the market with being wrong. In doing so, you take what had been a decision about money (external) and make it a matter of reputation and pride (internal). This is how your ego gets involved in the position. You begin to take the market personally, which takes the loss from being objective to being subjective. It is no longer a loss of money, but a personal loss to you (i.e., someone you knew was on the airplane that crashed). An example of personalizing market positions is people’s tendency to exit profitable positions and keep unprofitable positions. It’s as if profits and losses were a reflection of their intelligence or self-worth; if they take the loss it will make them feel stupid or wrong. They confuse net worth with self-worth. The very use of the terms right and wrong when describing a market position or business dealing means (1) an opinion has been expressed, which only a person can do; (2) the market position or business venture has been personalized; and (3) any losses (or successes) are going to be internalized. Remember when I described the high from being right about the market on my $248,000 day? “I” had just made all that money for me and everyone else. “I” was so smart. I didn’t know it at the time, but the only thing “I” had done was completely personalize my position in the market.

 - What I learned losing one         million dollars