Lesson Two-Poor Investing is Just a Bad Habit Lesson III

by | Nov 8, 2000 | Archives

Poor investing is as much a bad habit as drinking Coca-Cola, coffee, alcohol, smoking or watching too much TV. And all these habits are acquired in much the same way, through inundation from the moment we can understand language by a host of forces all wanting to direct us in a way that is beneficial for the forces. Soft drink bottlers pay schools money to let them advertise in schools. Tobacco companies take advantage of the fact that it is natural for teenagers to rebel. Etc.

Before we are old enough to think clearly the habits have already been instilled. So we just do what we have seen, heard and been told. We don't really think our daily activities through. We just do what we have always done and what everyone else around us is doing. We drive hours to work, wear ourselves out, live under ridiculous pressure and for what? We never ask this question?

As insane as it sounds a recent survey discovered that 59% of all Americans are dissatisfied with their work. Imagine this. The majority of the world does something they don't like all day every day! What a formula for financial disaster! Why? What for?

To help answer these simple but deeply profound questions we are reviewing a course Merri and I recently conducted at Merrily farms. The course is based on what Rumi, a famous 14th century Sufi poet once wrote, “Let yourself be silently drawn by the pull of what you really love.” We developed the course because most people never do.

In the course we looked at how this truism affects our wealth. Since we have to know who we are to know what we love we'll look at a special study that outlines several types of personalities to help understand ourselves better.

To put this in better perspective let me share what a delegate (from Argentina) said about the course.

“Dear Gary and Merri,

It is now two weeks since I left your farm after the Inspired Investing Seminar. What an understatement that name is! I needed to let some time go by to get a little perspective on where the growth stimulated by the seminar will take me. It is still early, but I can not go on postponing this letter to you.

As you know, I arrived at your farm in pretty poor shape: I was exhausted, stressed out by factors apparently out of my control and lacking focus as to how to continue to develop my business. Merri's care very rapidly turned that “burnout” state into a vibrantly alert wellbeing.

The company present was wonderful. We were a very diverse group, from very different origins in all senses, and all ready to explore our lives and how we work and play in them to make the experience of living it as joyful as possible.

I am already corresponding regularly with most of the participants and dare say that there is a number of friendships that are growing, a wonderful gift.

As to focus, I have learned much and am vibrantly stimulated. You will hear more about this in coming days, as I inform you of some of the ideas and developments since our meeting.

In writing to you I become aware of mixed feelings: on one hand, I wish you all possible success at the farm. On the other, however, too much success will mean that you will have a long waiting list! I leave it to you find and maintain the harmonious balance.

Again, thank you, and “abrazos” .

SR Argentina”

The interesting point here is that this delegate was suffering in his business because of stress. Simply understanding that the process of creating wealth could be fun immediately made him a better business person! The human nature follows pleasure and avoid pain. If we can do something we love that makes money we'll follow it diligently. If the process creates stress we'll try at some level to avoid it. This diminishes our success.

But what creates stress?

Being out of focus with our true nature is one of the largest creators of tension.

What is our true nature?

This is a complicated question but we can start to know ourselves by understanding that we probably fall into one of six categories:

#1: Innovators #2: Early Adopters #3: Early Majority #4: Late Majority #5: Deliberate and Skeptical Mass #6: Laggards.

To understand this better let's look at a study of a “diffusion model” from an analysis of the spread of hybrid seed corn introduced in Greene County Iowa in the 1930s. The seed which was superior in every way to the commonly used seed was first introduced in 1928.

Of the 259 farmers only a couple planted the seed the first year and through 1933. In 1934 16 used the seed. In 1935 21 more, then 36 more and in 1938 the number increased by 61. The years after 46, 36, 14 and then 3 started using the seed. In 1941 all but two farmers were using the seed.

Of the 259, the innovators were the first handful that began. The small numbers that then jumped on the band wagon from 1929 to 1933 were the early adopters. The early and late majority began using the seed in 1936 to 1938 and the late and skeptical mass did not try it until after the most respected farmers had proven its worth. The laggards never did make the shift or waited till much later.

This diffusion is quite typical of all things. One could study the use of faxes, cell phones, computers etc. and see a similar diffusion.

What type are you? The type is not important. No one is better than another. Knowing what type you are is everything because the world will try to get you to be whatever suits them best. You need to suit yourself if you really want success.

For example your local computer salesman will give you every reason is why you must have the newest type of computer for your business. If you are an innovator or an early adopter, you must have it. You'll likely put it to really good use in your investing or business. But if you are a laggard, you'll resist. This resistance, especially if your accountant, banker and business partners are all telling you to get this new fangled thing can really create a hindrance to your peace of mind success.

Once you understand what you are, you can take advantage of it.

For example if you are a laggard what kind of investor would you best be? Laggards make excellent contrarian investors. They are the ones who did not get caught up in the internet bubble. “Damn we'll never last” they thought. Sure enough they were right for now and if they shorted most internet stocks, they have made fortunes. But so too did the innovators and early adopters who jumped on internet shares early in the bubble. Both were right and both have made fortunes if they understood how diffusion works and who they were. They enjoyed the process as well, the early risers enjoying being on the leading edge, while the skeptics sat back and enjoyed waiting for the crash.

In business early adopters can make quick killings getting into new products before the big companies do. They carve out a niche and pick up quick profits making or selling what most others do not have. Then they sell out (usually for many times earnings) to big firms that serve the majorities.

Laggards on the other hand can cash in on nostalgia. For example I am sensitive to farming ideas when living up here on the farm so much of the time. One idea recently given to me by a laggard would create a big income. Plow my hilly fields with a team of mules. This would open up land that my new tractor cannot reach and would add value to the farm products. Imagine the story, “organic land tilled only by mules.” There could even be an added income from charging people to come plow my fields.

Get to know yourself better and you'll begin to understand what you really want to do. Once this is done you can actually start to figure out the best ways you can have good investing.

Next lesson we'll view the power of context and how this affects who we are and what it means to our investing and business.

Until then, good global business and investing!