Get my Free New Biz Jumpstart Kit!<\/a><\/div>\n<\/div>\n\n\n\nPoint #8: Nothing’s Free<\/h2>\n\n\n\n
The key takeaway here is how everything carries a price. Even if it’s not a monetary price, there is always some form of a trade-off. This is something that you’ll learn in any economics 101 class. The example, the author cites is how Monster Beverages yielded a 319,000% return between the years of 1995 and 2018, however it traded below its previous high 95% of the time.<\/p>\n\n\n\n
The point he’s trying to make here is that most investors view market volatility as a fine, rather than a fee. You have to trick yourself that the market’s fee is worth the price of admission. I think this takeaway transcends just investing. Ultimately nothing is free in life. There’s a famous law of 100, which essentially says that in order for you to get really good at something, you have to get through the first 100 attempts at doing that in order to get through all of your bad takes.<\/p>\n\n\n\n
For example, when you’re first creating a YouTube channel, your first 100 videos might really suck. I’m still in my first 100, and so I’m gradually getting better. However, over time you get to be better. Because you get more comfortable with talking to the camera, you get more comfortable with writing video descriptions, tags, and so on. And so, you ultimately start to develop taste.<\/p>\n\n\n\n
What you realize over time as you surpass bigger milestones, like your 150th video or you’re 250th video is that the first 100 were simply the fee to play the game. It wasn’t necessarily a fine. I’ve commonly found in different endeavors in my life that finding the price that you’re willing to pay and paying it is critical for your long-term success. <\/p>\n\n\n\n
Point #9: How We Play Different Games<\/h2>\n\n\n\n
The takeaway here was how we are quick to group ourselves from the lens of others, rather than define the game that we are playing for ourselves. For example, Housel writes about how in the .com boom, you might’ve FOMO’ed into buying a stock at $60 because some analysts were talking about it.<\/p>\n\n\n\n
But what you may not have realized was that the analyst was operating off a different time horizon than you. So maybe the analyst was just talking about it from holding it from a lens of one week versus five years or even 10 years. Time horizons were different. Just like how the games we’re playing are also different.<\/p>\n\n\n\n
When Spotify stock had a grant, it could be either incredibly overpriced or undervalued depending on what time horizon you’re operating under. So it’s really important for you to take a step back and think about the time horizon that you’re working under as well as the game that you’re playing. I agree with this, from the context of entrepreneurship. With several of my side projects, I found that it consistently takes more than 12 months in order to hit a traction point.<\/p>\n\n\n\n
Each time I’ve had shade thrown at me because someone that’s close to me thinks I’m crazy for devoting so much time into a project. But what they fail to realize is that I’m not operating off a three-month horizon or even a one-year horizon. I’m operating off a multi-year horizon. As a result, I get a longer runway for me to truly define what success is for that project and give it enough opportunities to have both timing and luck come into the picture.<\/p>\n\n\n\n
By doing this, it gives me a longer runway for framing what success looks like for a particular project or initiative, and it also allows me to execute a much more long term vision versus a short term vision. This was the same approach that we took when we were scaling our company’s revenues from just a couple hundred thousand dollars a year to several million dollars in sales.<\/p>\n\n\n\n
We understood that the real value of the business was in the recurring revenue model that we were creating, because we knew that as long as we could keep our existing customers, that that would create the baseline revenue for the following year that we could continue to stack onto over time.<\/p>\n\n\n\n
Point #10: The Seduction of Pessimism<\/h2>\n\n\n\n
I love this chapter because I felt like it was throwing low-key shade at CNBC the entire time. If you’ve never been on CNBC in the opening 30 minutes at the market, you should do so just for pure entertainment.<\/p>\n\n\n\n
What you’ll notice as you refresh the homepage is you’ll see that they changed the headline based on whatever’s actually happening in the market. And they’ll come up with some sort of reason as to why the market is up or down that day. Similarly, Housel writes about how human nature tends to latch onto stories around pessimism, over optimism.<\/p>\n\n\n\n
He says, we tend to view optimism as a sales pitch whereas pessimism is like someone is trying to help us out. He also talks about how progress often takes way too long to notice whereas setbacks happen too quickly to ignore. Growth is driven by compounding, which naturally takes time whereas destruction is driven by single points of failure.<\/p>\n\n\n\n
So the point that he makes here is that you have to define the price of success. You have to take note of the volatility and the backdrops over the long period of growth and whether or not you’re willing to pay that price. A perfect example on the seduction of pessimism can be seen in what happened in early 2020, the markets immediately tanked, and everybody thought that it would take multiple years for things to recover in the markets.<\/p>\n\n\n\n
Yet that’s not what happened. Going back to point number seven on the world being surprising, the Fed intervened in a way that it never has before. They printed unprecedented amounts of money and committed to this policy on a multi-year horizon, and as a result, things rebounded quickly.<\/p>\n\n\n\n
Many digital companies that would be traditionally viewed as super pricey, became the darlings of the market simply because of the scalability of their business models in a digital world.<\/p>\n\n\n\n
Big takeaways<\/h2>\n\n\n\n
There are two things I want you to remember from this article:<\/p>\n\n\n\n
- The first one is that you should focus on being reasonable over being rational. Personally, I struggle with this at times because I’m naturally an over-analyzer. However, it’s important for you to stay in touch with your human tendency.<\/li>
- The second big takeaway is to know what game you’re playing. You have to stop comparing yourself to other people and just focus on where you’re at today. What are you good at? What would you like to get better at? What are you not good at? Just because another person is further ahead in the game than you doesn’t mean that you can’t get started and start getting better.<\/li><\/ol>\n\n\n\n
If you found this article helpful, be sure to check out my YouTube channel<\/a> to get new videos every single week. I\u2019ll help take you from zero to self-starter as you grow your business, get more customers, and hone your business acumen. Feel free to share this with anybody that you think might also benefit from learning more about our psychology around money.<\/p>\n\n\n\n