In an article written for Vanity Fair magazine in October 2012, best selling author Michael Lewis gave us a glimpse into the life of US President Barack Obama, whom he had spent the previous six months shadowing.
It was a fascinating read. Lewis dug deep into the bowels of the White House to discover more about the President, and that includes joining him for his weekly basketball jaunts, traveling on Air Force One, and joining him in his residential wing within the massive White House complex.
In order to portray and bring out the more human side of the President, Lewis let loose some very interesting questions, including – if you had the chance to not be president for a day, what would you do?
On another occasion, Lewis also got the president to imagine that his presidency will end in 30 minutes and that he has to teach him, Lewis, how to be the next President of the USA. Admist his response, there is this one part that caught my attention
Here's our mistakes. Don't do the same.
We asked 14 Singapore finance bloggers to share what they would do if they could go back in time and invest their first $20,000. They can no longer rewind time, but you can learn from their experience and hopefully start with a better footing.
You need to remove from your life the day to day problems that absorbs most people for meaningful parts of their day. You see, I only wear blue or grey suits. I am trying to pare down decisions. I don’t want to make decisions about what I am wearing or eating. Because I have too many other decisions to make. That is why shopping is so exhausting. You need to focus your decision making energy. You need to routinize yourself. You cannot go through the day distracted by trivia.
Interestingly, Obama is not the only person who understands this very simple logic.
The late Steve jobs in his trademark turtleneck and jeans
Facebook founder and CEO Mark Zuckerberg
Is it a coincidence these three very busy and powerful people all choose to dress boring. Is there something we mere mortals are missing here?
I have always been fascinated by human decision making. In my opinion, it is a field closest to everyone’s hearts and minds but yet so throughly misunderstood and overlooked.
We breathe in the air around us and biologists have shown us exactly what the air does as it passes through our lungs and into our blood streams to mantain life. We look at the stars at night and astronomers and physicists have mapped out the systems and universes to great detail. Yet psychologists and economists and people who study the human mind have yet to come out with an overarching theory about how the mind functions when it comes to making decisions.
A lot of progress has been made in the past few decades, one of the most notable being Daniel Kahneman who suggested that the mind operates on two different and independent systems; System One being fast, subconscious and effortless and System Two being the exact opposite. For his work, he was awarded the Nobel Prize in 2002.
The theory on decision making is still in its infancy. Theories are patchy and disjointed. No one can fully explain how the human mind processes information and comes up with a comprehensive theory that encompasses all the nuances. (maybe there never will, given the complexity of the human mind).
Despite how little of theory we know, the entire human population, with highly developed intellect, are making decisions every single moment. We decide what to wear, what to eat, we decide who to befriend, what jobs to apply for where to go for holidays.
Especially so for investors. The very basis of existence for an investor is to make good decisions. He who makes good investing decisions survive. He who makes stupid money decisions will find himself out of the game very soon. How well we do, how much money we make, it all boils down to the very act of decision making.
Yet despite how prevalent decision making is in our every day life, we give scant thought to the processes behind it. We do not wonder if we are indeed making sound decisions. We are more concerned about the outcome, that is whether the stock goes up after we buy it, rather than the process, whether it was a good decision in the first place.
Three steps towards better decision making
And as Barack Obama has shown, good decision making is actually rather elementary – focus the decision making energy, routinize, and stop being distracted by trivia.
1. Focus. prioritize and ensure that you devote quality time and energy to thinking about your investments.
2. adopt an overall strategy that can apply to your investments. Anchor all decisions on something solid so that you do not have to go back to the drawing board every time you are presented with a new investment opportunity and
3. Ignore market noise.
So there. The next time you see me decked out in the same outfit, take heed. I am simply learning from the best!