Friday, March 12, 2021
It was my birthday two weeks ago. While those used to be fun parties, now the lockdown limits it to a small family gathering. It was striking that there were no “what do you want for your birthday” text messages. Would they have forgotten me? No, they know me enough by now to know what I enjoy, so I the children gave me three bottles of wine (Barolos and Amarones, jammy) and a book about money. I got clothes from Alice; “Because you have almost nothing left to wear and I also like it when you look nice”.
Last week I read that book The Psychology of Money by Morgan Houssel and kept the wine for a while 😊.
By money management we generally mean things like investing, personal finance, corporate financing, financial planning, etc. There are many schools, courses and books on how to do this. Houssel asks himself “whether there is evidence that this knowledge makes us better financial managers or investors or even happier? He has not seen any convincing evidence of this. Its core point is that we think and talk about money in a way that resembles physics too much (with rules and laws) and not enough like psychology (with emotion and nuances).
Well… great! I just wrote over 100 mails about Money Management with rules, habits, dos and don'ts, models, plans and spreadsheets. Because I always want to keep learning, I want to share some of his fascinating findings with you. The second chapter of his book is about “Luck & Risk”.
Houssel tells a nice story about Bill Gates' luck. In 1968 Gates attended one of the few high schools in the world where they had a computer; Lakeside high. Gates, 13 years old, and his classmate Paul Allen were obsessed with this computer and soon became computer experts.
What is the chance that something like this will happen? In 1968 there were about 300 million people of high school age in the world. Only 300 of them attended Lakeside school. So one in a million students attended that high school with a computer. Bill Gates happened to be one of them. According to Gates, Microsoft wouldn't have been founded if there hadn't been a Lakeside with a computer.
But the story doesn't end here. There was also a third computer geek at Lakeside: Kent Evans. He was one of Bill Gates's best friends and just as skilled with computers as Gates and Allen. "We would continue to work as a team and go to college together," Gates later said. Kent could have been one of Microsoft's founders, but he died in a mountaineering accident before graduating from high school. Every year about three dozen deaths occur among mountaineers in the US. The chance of dying on a mountain in high school is about one in a million.
The same odds, the same power, the same magnitude but in opposite directions. Luck plays a role.
Houssel states that you are only one person in a game with 7 billion other people and an infinite number of moving parts. The unintended impact of actions beyond your control can have more consequences than the action you consciously take.
But doesn't it matter what I learn, what I do? Is everything a matter of luck (or bad luck)?
I don't believe in that and I am strengthened in this by, among other things, what I have read in Brandon Burchard's High Performance Habits. He wonders “why some people succeed beyond standard norms consistently over a long time”. He calls them high performers.
In essence, Burchard argues that high performers exhibit or have learned certain behaviors and skills / habits that make them successful. His thesis is that success is determined by your behavior, your actions. Behavior that you can change and improve.
Let's take another look at Bill Gates. Why was he successful during and after his time at Microsoft? For starters, he's just super smart; level Einstein. According to the internet, he only worked in his early years. Nowadays there is time for sports and the family. He continued to study and still reads 5 hours a day. Gates is therefore seen as an expert in many areas, including the climate. In addition to an iron discipline (his days are divided by 5 minutes), he oversees his billion-dollar business down to the smallest details. He is also generous. Through his foundation he spends millions of his own money on health, nutrition, poverty reduction and education. So that's not all luck. Success is largely determined by your behavior; the way you think about things, your focus, the discipline and persistence with which you pursue your goals.
So you are largely in control of your fate, but it remains difficult to determine which part is pure luck. This applies even when we talk about the best way to handle your money.
What do I now take from the book and the Bill Gates example?
Successes and failures are determined by behavior and a dose of luck.
Therefore, do not focus too much on specific individuals and examples (can be just lucky or have bad luck) but more on broad behavioral patterns that lead to success or failure.
Finally; if opportunities are offered, you have to seize them.
M
Success is a lousy teacher. It makes smart people think they can't lose. BILL GATES
