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Common Causes of Very Bad Decisions by Morgan Housel
Old 10-12-2020, 03:26 PM   #1
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Common Causes of Very Bad Decisions by Morgan Housel

Morgan Housel regularly serves up brilliant insights in his writings. I thought his blog post from October 1st entitled, Common Causes of Very Bad Decisions, was particularly insightful. See the link below.

Here's one cause of bad decisions that's really worth remembering.

"Being influenced by the actions of people who are playing a different game than you are. The idea that advice can be good for one person and terrible for another is rarely obvious. Taking your cues and advice from people with different goals, abilities, and desires than you is an easy road to misery. But itís common, because smart people you look up to tell you itís good advice. The number of things that are true for everyone in finance is small; everything else is just figuring out how much risk you want to take and what you want out of life, which is different for everyone."

https://www.collaborativefund.com/blog/bad-decisions/
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Old 10-13-2020, 02:55 AM   #2
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Quite an article, with much to think about.

"Tribal instincts reduce the ability to challenge bad ideas because no one wants to get kicked out of the tribe. Tribes are everywhere Ė countries, states, parties, companies, industries, departments, investment styles, economic philosophies, religions, families, schools, majors, credentials. Everyone loves their tribe because thereís comfort in knowing other people who understand your background and share your goals. But tribes have their own rules, beliefs, and ideas. Some of them are terrible. But they remain supported because no one wants to argue with a tribe thatís become part of their identity. So people either willingly nod along with bad ideas, or become blinded by tribal loyalty to how bad the ideas are to begin with."

We find groups to support our uniqueness and lose some part of it at the same time.
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Old 10-13-2020, 04:49 AM   #3
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Quite an article, with much to think about.

"Tribal instincts reduce the ability to challenge bad ideas because no one wants to get kicked out of the tribe. Tribes are everywhere Ė countries, states, parties, companies, industries, departments, investment styles, economic philosophies, religions, families, schools, majors, credentials. Everyone loves their tribe because thereís comfort in knowing other people who understand your background and share your goals. But tribes have their own rules, beliefs, and ideas. Some of them are terrible. But they remain supported because no one wants to argue with a tribe thatís become part of their identity. So people either willingly nod along with bad ideas, or become blinded by tribal loyalty to how bad the ideas are to begin with."

We find groups to support our uniqueness and lose some part of it at the same time.
Tribalism NEVER happens on ER.org. LOL
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Old 10-15-2020, 07:53 PM   #4
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Originally Posted by AtlasShrugged View Post
Morgan Housel regularly serves up brilliant insights in his writings. I thought his blog post from October 1st entitled, Common Causes of Very Bad Decisions, was particularly insightful. See the link below.

Here's one cause of bad decisions that's really worth remembering.

"Being influenced by the actions of people who are playing a different game than you are. The idea that advice can be good for one person and terrible for another is rarely obvious. Taking your cues and advice from people with different goals, abilities, and desires than you is an easy road to misery. But itís common, because smart people you look up to tell you itís good advice. The number of things that are true for everyone in finance is small; everything else is just figuring out how much risk you want to take and what you want out of life, which is different for everyone."

https://www.collaborativefund.com/blog/bad-decisions/
This rampant on bogleheads. The advice from long time posters on that site comes from a perspective of 70 and 80 year olds, advising 30 year olds on "what I would do".

A 30 year old should not do what an 80 year old would do, financially speaking.

Nothing wrong with being 70 or 80. I hope to achieve that some day, God willing. Financial actions and strategies for people on that site, and probably this one, are vastly different because of different situations and goals.
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Old 10-15-2020, 10:37 PM   #5
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What I see more often is that people take advice from the wrong source. I have relatives that have told me...

"I don't want to work overtime because it will put me in a higher tax bracket and I'll actually make less money."

I asked them where they heard that, and they said the "guy on the assembly line" told them that.



If you're going to take advice, take it from someone who has done well in that area.
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Old 10-15-2020, 10:41 PM   #6
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Tribalism NEVER happens on ER.org. LOL
I don't know, but I AGREE totally with you ......
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Old 10-16-2020, 04:10 AM   #7
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This rampant on bogleheads. The advice from long time posters on that site comes from a perspective of 70 and 80 year olds, advising 30 year olds on "what I would do".

A 30 year old should not do what an 80 year old would do, financially speaking.

Nothing wrong with being 70 or 80. I hope to achieve that some day, God willing. Financial actions and strategies for people on that site, and probably this one, are vastly different because of different situations and goals.

You are absolutely correct. I was motivated to post Morgan's article here because one-size-fits-all thinking is so prevalent on the bogleheads. It's extremely dangerous. People need to think and act based on their own financial situation, goals, and risk tolerance. It's wise to avoid group think and the online mob.

Morgan has a way of making this point more eloquently than most.
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Old 10-16-2020, 04:58 AM   #8
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Years ago I considered the postings from select long time members that I had come to respect as a way to educate myself since I had no background in personal finances. This went on for a few years of reading thousands of their recent and historical posts. I also read a few books that were well respected until I felt comfortable to make financial decisions that were appropriate for me. I also gained enough knowledge to know what posts to ignore although appreciated the debates.

My decisions on investing may not be a good plan for others but it has worked exceptionally well for me.


Cheers!
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Old 10-16-2020, 05:28 AM   #9
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For years I have used this site for ideas and perspectives to investigate. Lots of good points made but you've got to figure it out for yourself. I believe a great majority here do exactly that.
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Old 10-16-2020, 06:08 AM   #10
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Originally Posted by Bigdawg View Post
Tribalism NEVER happens on ER.org. LOL
It happens everywhere I'm afraid to say. May even happen in your home...

The article really is quite a find. I hope more read it and comment.
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Old 10-16-2020, 06:36 AM   #11
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What I see more often is that people take advice from the wrong source. I have relatives that have told me...

"I don't want to work overtime because it will put me in a higher tax bracket and I'll actually make less money."

I asked them where they heard that, and they said the "guy on the assembly line" told them that.



If you're going to take advice, take it from someone who has done well in that area.
DW worked for the state and had a great pension plan. Coworkers told her sheís crazy to stay working because she was maxed out on time that contributed to her pension amount. I had to remind her time and again not to listen to those folks as we were working to fill our coffers.
It was a struggle.
I canít tell you how many times sheís told me one of her coworkers that retired had to go back to work because they didnít have enough money.
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Old 10-16-2020, 08:47 AM   #12
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Great read - the 2 most important points were the 2 already mentioned here - tribalism and listening to people playing a different game than you. It is so true, but I had never really thought about it that succinctly before.

Early on I listened to others even if they weren't playing the same game - later in life I learned to discern if what others said made sense for me or not. Great advice for all people, but should be taught in high school.
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Old 10-16-2020, 04:15 PM   #13
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Ask not what your tribe can do for you...

Tribal has its place during formative years I think. For example religious schooling was more effective than public schools, at least where I grew up. But 12 years in any tribe is a long time.
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Old 10-16-2020, 05:09 PM   #14
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But 12 years in any tribe is a long time.
So you'll be leaving ER.org in December?
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Old 10-16-2020, 05:19 PM   #15
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I was talking to my wife this morning about how our daughter at 33 continues to make incredibly poor life decisions. She remains unemployed, on ankle express and she's a full time couch surfer.

"people with different goals, abilities, and desires". What about people that have no goals or desires to do better and they ignore their natural abilities? That's where we're at with her.
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Old 10-16-2020, 05:42 PM   #16
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Humans are bred to seek tribal membership. It is a very strong survival skill. We constantly, mostly subconsciously, strive to belong to as many tribes as we can.

When you look for it, you can see how ubiquitous it is. The tribe of people with a little horse on their shirts. The tribe of people with a particular design on their shoes. The tribes who support particular sports teams. The opera people. The dog show people. The tweedy-uniformed academics. The tribes of people differentiated by their spoken languages. And religious tribes, of course. I can't even guess how many tribes, major and minor, that the primitive sections of my brain think we belong to.

A place where tribalism is a major factor is discrimination. Early waves of immigrants to the US were discriminated against for a couple of generations until their language and accents no longer made them easy to identify -- physically they aren't very differentiated, though last names are still somewhat useful. African slaves and more recent waves of immigrants (Somali, Hmong, etc.) are differentiated also by color, so they are easier to look at and say "not my tribe." It's baked into our genes and socialization can never change that fact. Not joking, IMO this will continue until interbreeding causes all the kids to be more or less the same color. (BTW Porky, this is genetics not politics.)
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Old 10-16-2020, 08:29 PM   #17
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Dan Kahan has done some interesting research on how "smarter" (more numerate) people don't necessarily make better decisions. They are better at rationalizing a decision when it puts them in their desired group. I find his talks very interesting, but you have to be a motivated watcher (they are a bit academic)...the first one I saw was in person. Here he is on TEDx

A classic on bad decision making is "The Logic of Failure" by Dietrich Dorner
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Old 10-17-2020, 08:58 AM   #18
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So you'll be leaving ER.org in December?
Any time is possible I guess.

The 12-year reference was to religious school upbringing, but it could apply to any group of zealots.

Please fill in <yourTribe> here.
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Old 10-17-2020, 09:06 AM   #19
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Reminds me of one of those satire motivational posters:
"None of us is dumb as all of us"
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Old 10-17-2020, 09:38 AM   #20
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Dan Kahan has done some interesting research on how "smarter" (more numerate) people don't necessarily make better decisions. They are better at rationalizing a decision when it puts them in their desired group. I find his talks very interesting, but you have to be a motivated watcher (they are a bit academic)...the first one I saw was in person. Here he is on TEDx

A classic on bad decision making is "The Logic of Failure" by Dietrich Dorner
Here is a link to Scientific American article by Dan Kahan on same subject.
https://blogs.scientificamerican.com...-before-truth/

It's on my list of to-read articles now.
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