The Mind of Wall Street: A Legendary Financier on the Perils of Greed and the Mysteries of the Market

All specialists have a time frame that they believe is important—the astrophysicist who thinks in terms of billions of years can’t put himself in the mind of the meteorologist who thinks about the future in terms of hours and days. Both will be befuddled by the archaeologist whose time scale spans less that that of the astrophysicist but more than

I think that one of the greatest mistakes of economics was to separate itself from other disciplines. You can’t understand economics without understanding philosophy and history.

both cases, psychology proved critical. Napoleon’s delusion was to believe in military strategy and underestimate the role of morale; his generals failed to appreciate that Russian citizens battling for their lives on their home soil had far greater incentive to fight than did a poilu from Paris yearning for the Champs Elysées. The LTCM strategists

Risks don’t disappear from markets or businesses; they are merely transferred or sold. In the end, Amazon was nothing more than a mail-order house.

But if entire nations can be seized by manias—recall Germany in the 1930s—why should we assume that people will always behave rationally when they invest their money?

The message is that mood or investor psychology is as important to markets as is information. It requires tremendous discipline to apply this understanding to one’s behavior.

Although Danny was clearly a master of the game, making money was not an end in itself for him. I think that is true of many successful people in finance. Apart from giving money away, they have passionate outside interests.

INVESTORS, we deceive ourselves a thousand different ways, both small and large. We attribute gains to acumen when they are the product of luck, and attribute losses to ill fortune when they are often the product of stupidity or inattention. We believe that the market remembers or cares about the price we paid for a stock, or that our stocks will g

One truth of archaeology in particular bears directly on my thinking. Archaeologists have their specialties, and one of the curiosities of the field is that those who specialize in one aspect of antiquity tend to be blind to anything else. Archaeologists who look for pottery sherds will not see coins, and, conversely, those who look for coins will