Things have been going well lately, and I now have a surplus of cash for the first time in a while. Err, rather, I have both a surplus of cash and some high consistency predictable future income. That's nice! I envy all you salaried people when I think about predictable future income. Having a decent chunk of cash, but no predictable future income means you don't really have a surplus of cash.
Anyways, I was thinking of what to invest a small bit of money in, and reading some papers and analyses and such. I'm reading a mix of finance, investment, politics, diplomacy, and history lately, which makes for a nice mix. It also has me interested in the topic.
Today, I read a really fantastically convincing argument, enough so that I was immediately ready to go buy a small amount of what the author was advocating.
Then I stopped myself! Wait, the author isn't necessarily correct - he's merely convincing.
I went back through the piece I was reading, which was quite a long piece. I started counting the number of premises the author had, and it went something like this:
If A, B, C, D, E, F, then G.
If G, H, I, J, K, then L.
Therefore, invest in L.
It was super convincing. But then it dawns on me, convincing doesn't mean correct. For instance, though the author doesn't explicitly state it, two of his premises are that the United States and Chinese economies, political leaderships, objectives, and currencies are going to be doing roughly similar things over the next 20 years to how they're doing now, maybe with a little bit of change but nothing drastic.
Perhaps that's not true! I don't know much about the current governmental leadership of China, who the next projected/potential leadership is, and their thoughts and objectives. Also, American economic, political, and monetary policy can change fast, and would it really surprise anyone if 2012 or 2016 brought in someone with significantly different monetary views than recently?
So, two of the author's biggest unstated premises are that China and America will behave roughly how we expect China and America to behave over the next 20 years. And if he's wrong, the entire analysis might fall apart.
It was a super convincing argument, but there's a problem with any argument that has a lot of premises chained together - if even one premise is wrong, then the whole conclusion might be faulty.
Convincing doesn't mean correct - it just means convincing. Stay skeptical. Keep researching.
John T. Reed claims that gambling and investing are just dictionary definitions that add up to the same thing.
When you move into to an environment that is chaotic enough for changing opportunities, then you can cheat the house if you play your cards right.
I'm pretty skeptical of whether researching investments is a good idea for non-professionals. Financial speculation is fun, but you are competing against specialists who have spent their whole lives studying the subject, have teams of researchers, and are betting so much that they can afford to buy the best computers, data, etc. I think almost everyone should just buy the Vanguard Target Retirement 20X0 fund.
The exception is if you're in the startup world & you know people who you trust & respect who are doing startups, angel investing in them w/ 10%-20% of your income makes sense to me. At worst you'll lose a little money & learn a lot about who to trust & how startups work. Another is if you know a city/region/country very well and want to own property there - ownership has advantages (ie we have done extensive customization of our cohousing community here in Mountain View) and since it's such a big asset it's definitely worth researching.
I came across your site a few days ago after a friend posted a link to your "What Skills Do You Need to be an Entrepreneur? Only Two" article. While I've read many different blogging sites about similar topics, there was something about your writing that has compelled me to stay on your site and read through dozens of your articles. In fact, of all the sites/blogs I have read, you are the first I have attempted to contact. You seem like a really interesting guy, and you have certainly inspired me.
Anyways, I read in one of your works that you aren't much a fan of small talk (nor am I), so I'll cut straight to my questions:
What are you thoughts on Ayn Rand? Have you read Atlas Shrugged or The Fountainhead? The reason I ask is because a lot of your writing seems to reflect some of the core points of her philosophy, at least on an individual perspective (as portrayed in The Fountainhead). I'm not sure how you feel about her philosophy for a society as a whole, as in Atlas Shrugged.
If you've never read her before, here is a good excerpt of her thoughts on money (to get an idea of what her books are like):http://www.capitalismmagazine.com/economics/money/1826-francisco-s-money-speech.html
Here's a habit I have which I hate, that you might be able to relate to. A friend might say that he thinks that a Zodiac boat goes really slow. I then reply that I'm not sure, but I think they're quite fast. As we go back and forth, I become more and more convinced that I'm right. My unstated goal has nothing to do with discovering the truth, but it has everything to do with convincing my friend that I'm right.
Often times he's in the same position, not totally sure how correct his position is, but determined to get me to believe him. If there's a more useless way to spend time than these sorts of arguments, I haven't discovered it yet.
It's not difficult to figure out why we do this. We all want to seem smart, and a good way to seem smart is to be right all the time. Including this time, dammit. And like any habit that's fueled by the ego, this habit is a good one to put on the chopping block for execution.