Success = doing nothing

The Duomo in Florence

“Michelangelo was asked by the pope about the secret of his genius, particularly how he carved the statue of David, largely considered the masterpiece of all masterpieces. His answer was: “It’s simple. I just remove everything that is not David.” – from Nassim Nicholas Taleb’s Antifragile

I am currently reading this book.  You may be more familiar with some of Taleb’s earlier works such as The Black Swan or Fooled by Randomness.  His philosophy is unique and applicable to many aspects of life.  One topic he discusses in Antifragile is the relative merit of acts of commission versus acts of omission.  An act of commission may be defined as something we take an active decision to do or something we act upon as a result of following someone’s advice.  In contrast an act of omission is not doing something, the avoidance of action or ignoring advice to take action.  Taleb argues quite convincingly that acts of omission have a much more beneficial impact than acts of commission – for example, not smoking has a far bigger impact on our long term health than eating organic food or any other positive choice we can make to try to improve our health.  Further examples from Taleb:

“In practice it is the negative that’s used by the pros, those selected by evolution: chess grandmasters usually win by not losing; people become rich by not going bust (particularly when others do); religions are mostly about interdicts; the learning of life is about what to avoid. You reduce most of your personal risks of accident thanks to a small number of measures.”

Interestingly and in contrast, positive actions are almost always viewed as the more admirable way to run your life.  Taleb describes this as follows:

“Acts of commission are respected and glorified by our primitive minds and lead to, say, naive government interventions that end in disaster, followed by generalized complaints about naive government interventions, as these, it is now accepted, end in disaster, followed by more naive government interventions. Acts of omission, not doing something, are not considered acts and do not appear to be part of one’s mission.”

Unfortunately it seems we are hard-wired psychologically to rank positive actions as superior to not taking action.  Further, we are more tempted to seek and follow advice to take positive action.  This, Taleb says, is not often in our best interest.

“Charlatans are recognizable in that they will give you positive advice, and only positive advice, exploiting our gullibility and sucker-proneness for recipes that hit you in a flash as just obvious, then evaporate later as you forget them. Just look at the “how to” books with, in their title, “Ten Steps for—” (fill in: enrichment, weight loss, making friends, innovation, getting elected, building muscles, finding a husband, running an orphanage, etc.).”

Miriam Webster defines a charlatan as: “a person who falsely pretends to know or be something in order to deceive people; a quack; one making usually showy pretenses to knowledge or ability”.

While Taleb applies the above to many different areas – life, business, academia, politics, etc., we think it applies particularly well to managing one’s personal finances.  With that in mind we came up with our own list of acts of omission related to personal financial management and investing – :

  • Don’t spend more than you earn
  • Don’t try to time the market’s ups and downs
  • Don’t try to pick stocks to beat the market
  • Avoid investment industry professionals that say they can help you outperform
  • Don’t be lured by complicated financial products that combine insurance with investments
  • Avoid high and hidden fees
  • Don’t make concentrated bets to try earn high investment returns
  • Don’t chase the hot stock or hot fund manager
  • Don’t sell out when markets (inevitably) have a sharp downturn
  • Don’t be jealous about your neighbour’s or colleague’s investment success
  • Don’t listen to the financial media and other noise
  • Don’t give up your disciplined investment strategy just because market conditions change
  • Don’t look at your investment performance every day, every week or even every month

I’m sure we’ve made omissions here but that’s just fine……..

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