Feeling Wrong
“Half the money I spend on advertising is wasted; the trouble is, I don't know which half.” —John Wanamaker
While all the major market indices saw modest losses for the week, Friday marked the end of a strong month for stock markets. For the month of May, the S&P 500 was up 4.8%, the Nasdaq rose 6.88%, and the Dow gained 2.3%.
Investing is an activity where you will be wrong. Warren Buffett, Charlie Munger, Peter Lynch, John Templeton—pick your favorite investor from the past or present, and you’ll see plenty of mistakes. That’s part of the game. If you take the risks required to earn returns above the risk-free rate, making some errors is inevitable.
In a 2019 conversation with The Veritas Forum, author and social psychologist Jonathan Haidt describes what it feels like to be wrong:
Haidt: What does it feel like to be wrong? Think about that feeling, and just call it out. What words come to mind?
Audience: Annoying. Bad. Awkward. Embarrassing. Ashamed.
Haidt: That’s what it feels like to be wrong? No. That’s what it feels like in the moment when you discover you are wrong. Until that moment, being wrong feels exactly like being right. So we are all wrong about hundreds of things right now and we have no clue, and the only way you can find that out is by talking to people who think differently. And if you talk to people who think like you, you will never find it out. You will just dig yourself deeper into a hole.
Like the quote about advertising above, you are currently wrong about plenty of things—it’s just hard to know which things. Maybe it’s not half of what you think is true, but it’s some number. And currently, those wrong things feel the same as the right things.
Maybe one or more of the things you are wrong about are the stocks you own. And maybe trying to find informed people who think differently than you is one way to figure out which ones you might be wrong about before it’s too late.
“If you’re great in this business you’re right six times out of ten. But the times you’re right, it overcomes your mistakes. So you have to find the big winners.” —Peter Lynch
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