Three Longs & Three Shorts

Dangerous Feelings

Author: Morgan Housel
Source: Collaborative Fund ((

The title is counter intuitively apt in the sense it refers to seemingly innocuous behaviour of ours that can be quite damaging in the long run. Morgan Housel highlights three such feelings we need to watch out for to avoid slide to mediocrity.
“Success has a nasty tendency to increase confidence more than ability. The longer it lasts, and the more it was tied to some degree of serendipity, the truer that becomes.
It’s why getting rich and staying rich are different skills. And why most competitive advantages have a shelf life. Jason Zweig put it: “Being right is the enemy of staying right because it leads you to forget the way the world works.”
It is of course possible to indefinitely maintain whatever skills brought you initial success. Lots of people and a handful of businesses have done it.
But when success is maintained for a long period the greatest skill often isn’t technical, or even specific to your trade. It’s identifying and resisting a few dangerous feelings that can nuzzle their way in after you’ve achieved any level of success.
  1. The decline of paranoia that made you successful to begin with.
  2. Finding other peoples’ flaws more than you look for your own improvements.
  3. The feeling of mastering a topic, particularly if that topic adapts and evolves.”
Housel elaborates on these to drive the point home, which Andy Grove, the late CEO of Intel makes in his book “Only the Paranoid survive”. At Marcellus, much as we look for paranoid promoters in the businesses we invest in, as investors we are cognisant of retaining the paranoia when it comes to our investment strategy and our portfolio.
An excerpt for point 2:
“A version of this happens when you see an investor spending all day on Twitter explaining why their competitors are wrong. I often wonder when they find time to figure out whether they, themselves, are right.
Charlie Munger says you shouldn’t have an opinion on something unless you understand the opposing side’s view as well as they do. It’s good advice, but it’s easy to take it too far. It’s almost always easier to find a flaw in a system than it is to discover why or how something might work, in the same way that it’s easier to destroy a relationship than build one.
A dangerous feeling is when your position on a topic centers around criticizing the other side versus evaluating why you’re right – or even better, why you might be wrong.
It’s a seductive trap because pointing out flaws is so much easier and more convincing than finding the obscure force that will make something work. It often signals that you don’t actually understand a topic but you want to be involved, and finding other people’s flaws is all you can come up with because you don’t have your own position to analyze.”