Money is a negative art

This is another noteworthy article by Morgan Housl from the Collabfund blog about what it takes to be good at investing. This is the first time I've come across this idea, and I want to preserve it here.

A funny thing about money is that it’s a negative art. You often have a better chance of accumulating more of it by getting rid of bad traits vs. acquiring good ones.

Most ambitious people’s intuition is to ask, “How can I get smarter? More informed? Find new skills?”

In many fields those are the right questions. Money is a rare exception where asking questions like, “How can I be less dumb, less greedy, less impatient?” can be more effective.

And there’s one trait whose removal from your personality can do more to improve your financial situation than anything else: The fear of missing out.

Having no FOMO might be the most important investing skill. Being immune to the siren song of other people’s success – especially when that success is sudden, extreme, and caused by factors outside their control – is so powerful and important that it’s practically impossible to do well over time without it. When strategizing, Dwight Eisenhower used to quote Napoleon, who said a military genius is “the man who can do the average thing when everyone else around him is losing his mind.” Same with money.

FOMO is recklessness masked as ambition. You see someone else getting rich and think, “If they can do it, I can too.” That feels like a good emotion – it feels like you’re learning through observation and following a data-driven path to success.

But what’s actually occurring is you are outsourcing your emotions to people whose quick windfall has probably left them in a fragile emotional state to begin with.

FOMO is also ruinous because it forces you into short-termism. If you only bought an investment because it went up, you’ll be the first to panic when it inevitably goes down.

Charlie Munger once said:

Someone will always be getting richer faster than you. This is not a tragedy… The idea of caring that someone is making money faster than you are is one of the deadly sins.

Remove FOMO from the equation, and what’s left?

  • You only care about your own goals.
  • You tend to avoid getting sucked into bubbles.
  • You tend to think long term.
  • And you don’t need much else to do well over time.