The title of this blog might seem like some heavy duty stuff but it isn’t really. I am just revisiting the aspect of how we think about the markets and how our actions impact our outcomes. I have touched upon this subject at various times as it remains my pet item and something that I keep researching on. Ultimately, we are a bundle of our own thoughts and beliefs that come out as actions and the resultant feedback of those actions create more beliefs and thoughts. Thus, this is a constant cycle of our life and hence paying attention to this is, according to me, most important aspect of playing the markets. Analysis, money, intelligence, connections, facilities, software etc. etc. are just a minor component that unfortunately, we pay too much attention to.
Everywhere we look, the press, the TV, the pundits, the brokers, the wise, everyone, is impressing us about how money is made over the long term. The length of this long term varies as no one quite has a handle what it is exactly. The first confusion begins from there. But that is relatively unimportant. What is more important is that this shift towards long term investing is a phenomenon of, say, the past 100 years. Before that long term investing probably didn’t exist in a structured form. How does that matter, you wonder? It matters very much because our brain is NOT designed to think long term!! Think back. Ever since life form presented on this earth, it has all been about survival. This meant look for food, watch out for enemies, find shelter, run for your life or fight to the finish if no other choice. Now understand that all these are short term phenomena! Feel hungry, find food, eat. Chill. Inclement weather, find shelter, go there. Chill. Spot a life threatening enemy, scoot as fast as possible away from it. Chill. So, essentially, spot problems, experience some temporary anxiety, solve it and then relax. A deer runs from the tiger and once the danger is over, it goes back to grazing. No after thoughts, no analysis of the situation past, no plans for averting such a danger ahead etc. for the deer. But humans are not like that.
Their problem is the more developed brain! And this development of long term being more recent (remember the old brain is more than 300,000 years old), thinking beyond the immediate anxiety phases and creating solutions are not yet part of its functioning. So after it takes care of whatever problems are faced currently, it continues to think ahead. Will this recur? What if I cannot meet this challenge tomorrow? What if my skill sets fail? What if others overtake me? And so on. Thus humans remain in an anxiety mode even after the problem is solved, unlike animals or primitive man who just went into reset mode soon as the problem got solved. An anxious mind cannot function too efficiently over the long term.
How does one deal with this issue? In other words, how can I create a long term thinking pattern in my brain? Well, there are many but one of the handier ways is to do a “worry-shift”. Instead of worrying whether your investment or trade will go up next week, worry about what you will do today if it drops. Instead of worrying about whether you will have enough money tomorrow to invest into markets for returns, worry about how best you can utilize the resources you have today. Instead of worrying about whether others with more skills will overtake you tomorrow, worry about what skills you can gather today in the time available to your right now.
What this worry shift strategy achieves is that it gives you a daily routine that allows your brain to enjoy immediate returns (something it is programed thru centuries to do) at the same time it also takes care of your long term requirements, as your current actions will be in line with your long term goals! Two birds with one stone! Since our ‘short term’ brain is much older (in terms of years) when compared to ‘long term thinking brain’ we have to be a bit inventive to help it deal with the problem!
There may be many other ways and I invite feedback from readers on how they have solved or attempted to solve this problem of our very creation. I am only highlighting here the magnitude of the problem we face when talking about long term!