Think for yourself. Book#35

I got to this book The Big Short: Inside the Doomsday Machine by Michael Lewis in June 2015. I remember quite well since I was in holiday in Norway and had a hiking accident. I broke my foot and this book kept my company. At the time I had already read a few things on the GFC. Yet it was a good reminder once more of the many issues in wall street.

Many people have expressed their surprise following the truths revealed here. But my main takeaway from this was actually that everybody was to blame, because everybody followed the herd.

The winning managers from the hedge funds mentionned in this book were independent thinkers and that’s why they succeeded. If when the party is on you do smell the fire but don’t want to be the first to leave, blame only yourself if you get injured. Yes the average amercian didn’t undertsand complex products but was he not aware that the gains he was making on his house and by refinancing his unafordable mortgages were too good to be true? I don’t think so. Why did he keep doing it anyway? Because everybody was doing it and he wanted some of it too. Even the politicians and supposedly smart leaders got caught.

Bottom line, my main takeaway is that this is not only a story about bad incentives. If people have the incentive to do the wrong thing, they will. This is true everywhere. For me, first and foremost, this is a story about human psychology, about how few people in our world think for themselves, about how everyone follows the herd, and about how different and mentally strong one needs to be, to take the opposite route.

My purpose in life is independence, fulfilment and a better understanding of how the world works. Like Charlie Munger, I believe in the discipline of mastering the best that other people have ever figured out. And like Sir Isaac Newton, I believe in our ability to see further than any others before us by acknowledging that we are standing on the shoulders of giants. With this blog I hope to keep track of my learning about investing, business, decision making, entrepreneurship and self development while inspiring others to do the same. For the moment the format of this blog will be one post for each book that has influenced me, but I expect it to evolve over time. Join my Journey. John.