Speculation: A Game You Can’t Win

The thing we often forget is that when an asset or stock price crashes, a ton of people are losing a ton of money . Savings are decimated, jobs are lost, and futures are thrown into question. There are countless stories unfolding as a price chart bends toward zero, and you can assume that most of them aren’t too pleasant.

Once again, you buy an asset for $1,000 and then sell it for $10,000, making a 10x return. But what if a few months later, you see that the asset crashes and plummets down to $1?

When you sell something, you do so under the belief that this is probably where the peak will be. You believe that this is the top of the hill, and that it’s time to get out before things may slope in the other direction. And by all measures, a 10x return is something to be quite happy about, especially if you achieved this return within a span of ... See more

As I’ve said before, financial freedom isn’t about money, it’s about attention. The less you have to think about money, the more free you actually are.

And when that happens, you get hit with a heavy tax that is emotional rather than fiscal: Regret.

We often view the problems of speculation through a fiscal lens, but it should actually be viewed through a moral one. It’s not often viewed this way, but when you take a moment to do so, you’ll see how pernicious it really is.

It is for this reason that speculation is a game you can’t win. On one hand, there’s the burden of regret resulting from selling too early (or from selling too late at a realized loss). On the other, there’s the schadenfreude you embody by selling right on time. Whichever path the asset ends up taking, there’s a mental tax to be paid on top of any ... See more

Speculation is the antithesis of that statement.

Here’s the thing about speculation: Realized gains feel like penalties when they’re interpreted as missed opportunities. Walking away with a great 10x return will make you feel terrible if that came at the expense of a future 100x return. If the top turned out to be much further out than you thought, then you can’t help but to be unhappy with the g... See more

To be happy that you made money on something that crashes is a form of schadenfreude : a German word for taking pleasure at another’s misfortunes. It’s arguably the lowest of all human emotions, especially if it’s directed toward people that just want better lives. Yet schadenfreude is exactly what we’re embodying when we’re elated that our 10x ret... See more