Obscure Observation – Master Moves

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Nobody is so smart to learn everything from their own experiences – Charlie Munger

I invested in a pharma company in 2017, the fortunes changed for the industry in 2020 and now has given windfall gains. I have taken full credit for my good decision making SKILLS and it’s outcomes. Now I’m reinforced to repeat the same decision making process.

But what happens when I get a negative outcome ? Do I take the credit for my negative outcomes ? Mostly no. I blame it on LUCK by saying “oh I wasn’t lucky”

The tendency to take credit for all good outcomes as skills and blame all bad outcomes as luck is “Self-Serving bias”

Have you observed a election poll result day ? the party that wins and their leaders take full credit for their superior decision skills and outcomes, but when they lose the election they blame it as rigged voting machines, Vote for money etc that’s self serving bias

We give up so many learning opportunities by treating outcomes this way and we are nowhere getting closer to truth. If we are so biased at learning from our own outcomes what about learning from observing others ? that too is loaded with biases.

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We can learn a lot by just observing” – Yogi berra

Yes by observing others we can learn a lot. I have a separate journal in which I noted down decision making process of other investors. why did investor X invest in this company ? What variables did he consider ? At this point of time what made him to make a big bet on this company ?

This exercise has helped me to learn a lot just by observing other investors decision making process and it’s outcomes without any cost. But a bigger problem in learning from observing others is – The reverse self serving bias

In the reverse self serving bias – I treat others good outcomes as LUCK and their bad outcomes as their own LACK OF SKILLS

When other investors experience good outcomes I treat it as “that’s just luck” instead of objectively seeing the outcomes and when they take a loss I tend to treat the bad outcome of others as “oh he’s got no skills in investing” this biased way of seeing others outcomes leads us to be biased in learning from observing others.

We learn and get closer to truth only if we assess our own experiences and others outcomes objectively. So here’s what we can be done

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When an outcome is good don’t take full credit by saying “oh I’ve made a wonderful decision” there maybe an element of luck involved in that process. Objectively assess and try to separate skill and luck from the outcomes.

If an outcome is happened due to luck ( Ex: Current pharma rally was not in my control) don’t take credit for it – If your biased and take credit that it was due to superior skills you may repeat the same decision making process and get punished in the future.

If we want to learn from others outcomes by observing, don’t be biased and egotistical to not give credit for their good outcomes. Try to separate skill / luck in others decisions and outcomes too, also don’t give them credit for outcomes that turned out due of luck ( you may be blinded by authority bias)

Decisions within our control are skill which can be honed – My decision making process, assessment , buy price, choice of company.

Decisions outcomes we have no control over are luck factors – Markets, volatility , behaviour of stock price etc

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I am personally learning a lot from my own outcomes and decision making process and outcomes of others with no cost only by being objective to treat outcomes as Luck or Skill.

Thanks for reading, best wishes on your learning journey. Will see you all soon in a new phase.

Books for further reading on this

1. Thinking fast and slow

2. Thinking in bets



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Ragavendhra Perumall
Ragav is an ardent follower of Warren Buffet, a political enthusiast and a business person. He writes more on real-life instances combined with the mental models. Reading widely and interacting with people in various fields have helped him become an astute investor.
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