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Hey everyone. Tim here, and this week I’m back with another post this time on billionaire Chamath Palihapitiya.

NAVIGATE UNCERTAINTY

He’s an activist investor. He has been on a lot of different news channels recently, like CNBC, and doing a lot of interviews on what he thinks is going to happen in the markets over the next 12 months. I watched a few of his interviews, and here are some of my takeaways on what I personally learned from those.

One of the key takeaways is that in order to navigate uncertainty, you have to be very mentally stable, and have your mental state under control.

I know I talked about psychology previously, but it’s such an important topic that I must must reemphasize it! With everything going on, you want to be paying attention to what triggers you. Things that trigger anxiety, anger, sadness or other heightened emotions. More specifically for investing, you must pay attention to these emotional triggers because they’re going to affect how you make decisions in the markets. If you do something that’s in hindsight, a dumb mistake, you could pay the price for it and lose a lot of money.

 

 

Chamath is personally approaching the situation by constantly checking his ego, and trying to find ways to improve his mentality. Every time he wants to make a decision on investing, he never assumes that he knows everything. This applies to us as well. It’s part of investing, and making decisions in everyday life because our lives are a series of bets and decisions that determine how successful we are.

BE LEVEL-HEADED

Essentially you just want to have a level head and have equanimity. Warren Buffet, Jeff Bezos, and many other successful people do not act all-knowing. If you watch interviews specifically on Jeff Bezos, he always speaks, in terms of what he “believes” rather than stating his opinions as facts. He is able to convey his beliefs, and have strong decision making skills by controlling his ego. He loses his ego and does let it affect his success. If you’re able to replicate this mentality and thought process, this will make you successful. Understand how successful individuals reduce their bias and how they let go of the ego. That is how you’re going to have the most success out of life and in the financial markets.

Currently this is an unprecedented time. It is a unique experience in our lifetimes, but it is also an experience that everyone in the world is going through together. Everybody is being affected. I think it’s very important to really find out what is important to you. That’s another takeaway I got from Chamath. Now is the time to find out what you truly value. You’re going to see people who are in relationships double down, and realize that they love their significant other. You’re going to see people who break up with their partners. People who spend the time thinking of their values, will realize realize their true passions in their professional and personal lives.

THE PSYCHOLOGY OF THE FINANCIAL MARKETS

We are in a big deflationary period, and deflation normally happens in a recession or a depression. Essentially what deflation means is: when economic output slows, the demand for investment and consumption dries up. This causes asset prices to decline. The government must step in, and they decide to print money, and buy assets to artificially inflate everything. However the government stepping in, buying assets and printing money, does not solve the root cause of the economic situation. It does not solve unemployment. Markets have been going up a lot in the past few weeks.

 

 

Bearish people are confused. They try to short the market early, and now they are panicking. That’s very important to notice because usually the markets change when people least expect it. Everyone thought the markets were going to tank but the markets are rebounding.

Now the market has rebounded, and now it’s basically waiting to fall. It’s in the stabilizing period. The markets do not move how you want them to immediately. Be patient! You will see all these bears, people who are now re-considering if the markets are going down. In the next couple of months, if the markets tank, it will probably happen when people least expect it.

 

 

RARE ECONOMIC SITUATIONS

We are currently experiencing rare economic situations in four different areas.

#1 Pandemic

Right now we have the pandemic going on, and we haven’t had any experience at this scale.

#2 Economic Retraction

All of a sudden now we have an economic retraction and contraction.

#3 Federal Approach

We have the federal government now needing to come up with new ways on how to approach the situation.

#4 Oil Price Collapse

There is also the whole oil price collapse.

I don’t believe these factors have been reflected in the markets. It will be very exciting to see how exactly this pans out over the next six to 12 months. The big takeaway with all this stuff going on right now, is that it’s okay to be uncertain. It’s okay to be unsure. I think specifically for investors, everyone’s always trying to be in some sort of position. Where’s the next opportunity? Should I go short here? Should I buy here? In reality, we’re at the point, especially on the charts as well for technical analysis. Waiting on the sidelines is important now. Observing, being present, and not needing to feel any sort of pressure to make any sort of decisions, but just by being present, understanding and reacting to what’s going on. I think that is what is going to set people up for the most success, especially with investing in the next 12 months.

PREDICTION

The last thing I want to talk about is prediction. Human beings are bad at predicting things, especially in the financial markets.

The reason why it’s especially important in the markets is because you can be right, but still be wrong. Let me give you an example. Let’s say you buy a stock that drops 30%. Initially you think ” Wow! 30% discount.” Or if you bought it, and it drops another 30%, now you panicking, and you sell. However in another few months, now it’s up a hundred percent. These things happen to people all the time. It ties back to what we were talking about earlier, which is psychology!  I highly recommend you guys spend time learning what actually triggers you. Specifically for decision making and predicting. There’s a good book on this called Thinking in Bets by Annie Duke. I highly recommend you guys check it out. It talks about how life is a series of decisions, and your success is basically determined on all of your past decisions combined.

I want to end with a quote by Mark Twain.

“It ain’t what you don’t know that gets you in trouble. It’s what you know for sure that ain’t so”

Basically it’s not what you don’t know. It’s when you start seeing people let their egos get the best of them, and start thinking they know something. That’s when we get in the most trouble with ourselves.

Let me know if you guys enjoy this post and please comment below. Stay tuned for more!

 

 

4 Replies to “Billionaire Chamath Palihapitiya On Investing Psychology”

  1. Tim, once again you did an excellent job in sharing your thoughts in this video. Thanks for the book recommendation on “Thinking In Bets.” I do have a suggestion for you regarding your subparagraph on “Observe the sidelines; sit back, and be present. I agree with this, however I think that we can and should do more while sitting on the sidelines. To me, this is an excellent time to learn and prepare for the next major move, by being proactive in seeking information and advice on how to trade and invest in the markets. I think you should encourage newbies, in particular, to consider getting educated in this area from you, Tom and Jonathan at Stock Navigators while they have this opportunity. Consider letting them know in your video that you guys are available to help them now, while waiting on the sidelines. Thanks again, looking forward to your next video.

  2. Excellent summation of uncertainty in the future which is unknown to all investor that will trigger anxiety which needs sound mind.

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