Source: Steel Seal of Thought

1. Ride the roller coaster yourself

A few years ago, the author wrote an article on investment and financial management, to the effect that stock trading is either not to be touched for the rest of your life, or as soon as possible. Because of raising the level of investment, you always have to pay tuition fees. When you were young, you had little capital, few tuition fees, strong learning ability, and “study time” was short. Even if you lost money and went bankrupt when you were young, there was enough time to get back on your feet, but middle-aged people aren't necessarily; older people are younger, and middle-aged people collapse; big stock losses are one kind of thing.

A colleague who was new to the workplace at the time read my article and told me that he had already opened an account, borrowed money, and needed additional leverage.

——??? Isn't that how you pay tuition fees?

He said that when he was in school, his professor gave him a paper on investment strategies. The conclusion was that in the phase of rapid growth in cash income, moderate leverage is the best investment method. Closing a position is also a fake “liquidation”. It won't actually go out, but as long as you can seize a big opportunity, you can achieve rapid wealth growth.

It sounds very reasonable. It was only a few years later that I met him again and talked about this. He said that after having experienced it once, he knew that a theory is a theory after all.

He had good luck. As soon as he came up, he made a huge profit. According to the paper's method, he should have leveraged his next salary income, but he discovered that he couldn't do it no matter what. It's like a glass suspension bridge. You know it's safe, but you can't help but feel weak in your legs.

Watching other people ride a roller coaster is completely different from sitting in person. Some people have ridden once and want to ride countless times, while others have ridden once and never want to sit again for the rest of their lives — you don't know what kind of person you are, but you only need to sit once to know.

Even the perfect theory will also encounter uncertainties, whether it's investment and financial management, or anything else that is a bit of a threshold. The biggest uncertain factor is yourself.

2. Man is a slave to the target

Many people have heard the phrase “the biggest uncertain factor is yourself”, which is commonly understood as: if you want to succeed, manage yourself and overcome your own obstacles and uncertainties.

However, when I say this, I actually don't really understand this statement. Most success studies focus on self-management. People need time management, energy management, emotional management, etc. In fact, these are all scientifically rational and can be done. There is nothing uncertain; they all avoid “real uncertainties.”

You think, since the biggest uncertain factor is yourself, how can you expect yourself to “manage yourself first”?

What exactly is human uncertainty? I think there are at least two major uncontrollable factors.

The first factor is “your goal.”

For example, when it comes to investment and financial management, in the beginning, the mentality of most people was simply that they had too little money and wanted to “make money.”

However, if you make money soon after, and you don't think it's difficult to make money, this goal will quickly rise to “get rich quickly” and “become China's Buffett”;

If they lose money later, some people will use compound interest and long-term investments to comfort themselves, while others completely give up and think that investing in financial management is just another kind of “pyramid scheme.”

Every once in a while in life, I always set a new goal for myself. Even if my goals don't change, my expectations will change. This is the first kind of uncertainty.

Think back to it, have you ever had the feeling that something you've been painstakingly looking for just got it and then just lost it? When you are working hard to pursue your ideals in life, have you suddenly had the thought “life is not worth it”? Are you often plagued by guilt when considering whether to give up, but when you actually give up, you feel at ease?

Because, many people are slaves to their goals.

Those ideals you're willing to spend your whole life for, you don't even know when it will enter your brain, and you've been exposed to all kinds of wonderful things. Why did it become your pursuit? Who instilled it in you, or is it already engraved in your genes?

There are lots of life goal design courses, which say you've lost your goals and are living like a walking dead, you should design the best life goals for yourself to guide you forward—but I think there's something wrong with this statement.

A zombie's “life” goal is very clear. It is to eat human flesh and blood. It doesn't think why it does it, and what makes humans different from zombies is that people reflect and even doubt their own goals in life.

After watching too many “yesterday's kinds, such as yesterday's death, today's kind of life,” I'd like to say that losing your goals in life is not a bad thing; it's breaking the shackles of life; this is human rationality.

Yes, you'll suddenly wake up from your own carefully crafted dreams — that's the first uncertainty in life.

Three or three times emotional standard deviation

“Steel University, if this company invests and holds for a long time, what are the benefits?”

I've been educating investors for many years. In the beginning, I really wanted to see investors hold a stock for a long time, be friends with time, and grow with the company, but now, when I hear similar questions, it's a bit overwhelming:

I'm going to remind you now, “Don't think about what happens if you hold it for a long time. Just think about it, how much can you afford to lose at most?”

Most people plan to hold for a long time after being locked up. Half of them sold up less than 10% after unbundling, and the remaining half sold when the loss was unbearable to a certain extent.

The reason is simple. For most people, time is not a friend, but an enemy, or rather, slowly turning friends into enemies. Most people underestimate the torment of time on the mind. The time they imagine is fast moving forward. At least all the difficulties are fast forward. Just shout “come on, stand up” and it's over.

How does time slowly affect the way we do something? The answer is another factor we can't control — emotions, which have three characteristics:

1. Mood fluctuates, sometimes positive, sometimes depressed

2. Mood swings are small most of the time, and larger in less time

3. Everything you've been clenching your teeth for, once you give up, you won't start again

The fluctuation in your mood value each day is a normal distribution, which can be shown in the following figure:

The horizontal coordinate is an emotional state. The left side is negative emotion, which shows that you don't want to do this; the right side is a positive emotion, which shows that you want to do this; the vertical coordinate shows how often this emotion appears.

The peak in the middle describes a time when there are no mood swings, and the frequency is highest; the farther you go, the more extreme the mood, so the frequency is less frequent, and the overall distribution is normal.

The structure of a normal distribution has a standard deviation. The so-called standard deviation is a statistical concept. As long as it is a normal distribution, the proportion of states outside of the standard deviation is a fixed value. Assuming that 1 times the standard on the left represents a low mood that makes it difficult to work, accounting for 13.6%, while 2 times the standard deviation means that your mood continues to stop, accounting for 2.1%, and 3 times the standard deviation means you will give up forever, accounting for 0.1%.

The effects of emotions other than three times the standard deviation are irreversible. The probability of it occurring is very small, but it exists objectively, so it will occur as long as enough time takes — this is the biggest damage time can do to your persistence.

For example, everyone knows the power of compound interest, but your account rarely grows like compound interest, and there is only one Buffett in the world. Precisely because compound interest requires constant repetition and long enough time, the longer it is, the more likely it is that black swans outside of the standard deviation will occur, making you give up on it.

Here we need to correct a mistake about success studies — as long as you have a firm will, you can stick to it until the end. However, this is not the case. A person with a small standard deviation in mood indicates that there is little change in mood, but the probability of a standard deviation of more than two or three times is the same.

In particular, the probability of three times the standard deviation is not entirely up to you. It is possible that the environment around you has drastically changed, such as the company going out of business, such as family misfortune, etc., and the probability of these external events occurring is the same.

Compound interest and everything that requires persistence for a long time, and the inherent uncertainty of human beings are a pair of natural and irreconcilable conflicts. This is the second unresolvable uncertainty.

4. Facing uncertainty

These two inherent uncertainties make it impossible to manage oneself at a higher level; they can only face the uncertainty of life, adjust expectations, and wait for the gifts of fate.

First, with regard to the uncertainty caused by mood swings, in addition to understanding one's own emotional characteristics and reducing the impact of negative emotions more than two times the standard deviation, it is more important --

When you're young, do things that seem very difficult but can be quickly proven, and failure won't waste you much time; don't do things that seem very simple but take time to repeat.

As you age, your worldview, ability structure, way of thinking, and life goals are becoming more and more stable. Your “standard deviation” is getting smaller. On the other hand, you have less time left in your life, and there are fewer fluctuations of three or even two standard deviations.

Second, there is no good way to be uncertain about life goals, at least when you are young. You can only accept this uncertainty, and accept that you may regret whatever you do.

As they get older, “roller coaster” also knows that they like it or not, so they can try to control this uncertainty and stop challenging anything other than their professional knowledge. During the golden growth period of the past 20 years, there were plenty of gaps in the country and punched to death because there were no “teachers” in these emerging fields at all. It depends on whether you have the courage. Tsinghua Peking University is not as bold. That's right, but in this day and age, the fault tolerance rate has been greatly reduced.

There is a study on changes in fund managers' investment styles. Young fund managers prefer growth styles. They hold TMT (technology, media, communications) in the industry, and as they age, their holdings shift to more traditional and deterministic industries such as the consumer medicine cycle.

Fund managers have a different understanding of risk than the average person. When they reach the age of 40, they can freely accept their own shortcomings. As Munger said, if they know where they will die in the future, they won't go away for the rest of their lives.

Don't force yourself to work harder to find a goal in life. What's worse is being constantly enslaved by various unreal life goals throughout your life than doing nothing in life. The younger you are, the less likely you are to have a particularly clear life path plan.

edit/lambor