The Fallacy of Romanticizing the Past


I’m currently reading Jared Diamond’s The World Until Yesterday: What Can We Learn from Traditional Societies on my Kindle to and from work. It has little to do directly with finance, but I often find that there are trickle down effects of knowledge and insight to gain from different disciplines that are very helpful when thinking about finance. It helps you build better mental models to deal with complexity. A passage I read this morning got me thinking about our tendency to warp the past, usually for the better.

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Thoughts and Notes on Influence by Robert Cialdini

This is a really long read. I’ve basically taken all the quotes I found interesting from the book Influence by Robert Cialdini and just typed them out here, along with some of my own notes and commentary in bold italics. If you’ve never read the book, this is probably going to give an overview of what the book is about and its six main sections. I think this is a highly valuable book, with lots of insights on human psychology that is relevant whether you are operating in the markets or going to a party. Going through the book again and writing all of this helped further solidify my own takeaways from this amazing book.

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Mental Model: LIFEMORTS

Interrupting your regularly scheduled broadcast of my monotone voice reading out Berkshire Hathaway’s annual shareholders letter from 1977 onward (find 1977 here and 1978 here) – which got interrupted, first by a weekend of intense video gaming with a friend visiting from out of town and then by Father’s Day, but should be back on track starting this weekend with 1979 almost fully recorded – I recently finished Why We Snap: Understanding the Rage Circuit in Your Brain by Douglas Fields and I wanted to try something slightly ambitious: connect the main concept of the acronym LIFEMORTS from the book into the Trump phenomenon. Bloody hell that sentence was the length of a paragraph. My sentences seem to get longer and longer with each passing year out of school.

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Inverting Chains of Habit

There’s a quip that Warren Buffett likes to throw around frequently which goes along the lines of:

The chains of habit are too light to be felt until they are too heavy to be broken.

What’s the first impression you got after reading that? That’s right: a negative impression. You most likely thought of the negative consequences of habit. Things like hookers, blow, needles, hooch, etc.

While it’s advisable to avoid these things in life, there is a whole other side of the equation of that nugget of wisdom that takes a little more effort to ferret out.

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Mental Model: What the Fall of Dividend Mantra can Teach You About Your Circle of Competence

Mental Model What the Fall of Dividend Mantra can Teach You About your Circle of CompetenceThis is old hat for many of you, but it is an extremely important model to conform to: know thy circle of competence and stay within it at all times. It’s seductively easy to stray out of our circle of competence. People spout on about things they have little to zero knowledge of all day, every day. Go check out the bowels of Reddit if you need confirmation. The harm is minimal when you’re bullshitting with your friends, although you may be labelled a douche if your ignorance is ever caught. But the harm can be tremendous when it comes to your hard earned money. Look at all the people who got burned recently with Kinder Morgan. How many were piling in because they understood the intricacies of the risk/reward payout of pipelines, master limited partnerships, and the energy sector? Or were many getting lured by the promises of management and a history of rising dividend payouts? Hindsight is hindsight, but if one really understood Kinder Morgan and the business environment it operated in, there potentially could have been red flags that were raised as you studied the company in depth. But I’m not here to talk about Kinder Morgan today. Let’s speculate on the fall of Dividend Mantra.

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