Lessons from “What I learned by losing a million dollars” book: issue 1

In the July of 2020, I read What I learned by los­ing a mil­lion dol­lars book. I blogged a quote that I loved from that book. But there are many nuggets of wis­dom and life lessons in the three chap­ters in the sec­ond sec­tion of the book titled Lessons Learned.

While this book is about the author’s per­son­al sto­ry of how he lost mon­ey in the US stock mar­kets, I think the psy­cho­log­i­cal process­es he explained in chap­ters 5, 6, and 7 are uni­ver­sal and equal­ly applies to life as well. i.e. if we swap the words busi­ness and mar­kets with life in the fol­low­ing book notes, the prin­ci­ples the author is teach­ing still hold. So I bor­rowed this book again from the library to re-read and take and share notes pri­mar­i­ly for myself and for any oth­ers inter­est­ed.

This post is the first in this series to read and share what I believe are impor­tant take­aways from this book.

Instead of shar­ing all the book notes in one large post, I will make a series of small­er posts with the quotes and lessons I would like to remem­ber. I hope you will find them help­ful too!

Chapter 6: The Psychological Dynamics of Loss

In this chap­ter the author explains what hap­pens when a busi­ness or mar­ket loss gets per­son­al­ized. He also explains the dif­fer­ence between exter­nal, objec­tive loss­es and inter­nal, sub­jec­tive loss­es.

Most peo­ple equate loss with being wrong and, there­fore, inter­nal­ize what should be an exter­nal loss.

In the finan­cial mar­kets, peo­ple tend to have dif­fi­cul­ty active­ly (as opposed to pas­sive­ly, as in the case of the fruit-deal­er who expects that two out of one hun­dred apples will rot and light-bulb man­u­fac­tur­er who knows that two out of three hun­dred bulbs will break ) tak­ing loss­es. This is because all loss­es are treat­ed as a fail­ure; in every oth­er area of our lives, the word loss has neg­a­tive con­no­ta­tions.

Peo­ple tend to regard the words loss, wrong, bad, and fail­ure as the same, and win, right, good, and suc­cess as the same.

For instance, we lose points for wrong answers on tests in school. Like­wise, when we lose mon­ey in the mar­ket we think we must have been wrong.

Most of the time lose or loss is asso­ci­at­ed with games. Some­how, the con­cepts prof­it and loss get con­fused with win and lose and right and wrong. But if you lose as a par­tic­i­pant of a game, you weren’t wrong; you were defeat­ed. If you lose as a spec­ta­tor of a game, you must have placed a bet (or expressed an opin­ion) on the game’s out­come and you lost mon­ey (or were wrong), but you were not defeat­ed.

I am still pro­cess­ing the above notes since I first read them some months ago, and I will con­tin­ue to pon­der over these notes for the fore­see­able future.

In the next post I will share some notes on exter­nal vs. inter­nal loss­es.


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