By Alan Steel
It’s not easy facing up to the fact that if you don’t understand the thinking that’s keeping you poor then it’s fairly certain that you’ll stay that way.
So if you’re just joining us I suggest you have a quick read of The First Barrier to Becoming Wealthy and then Wealth Barriers: How to Outsmart Your Lizard Brain.
Now, it might take you five minutes to plow through both of those pieces but it will put you in the frame for what’s coming next; the best example of overcoming the barriers to wealth on the planet, Mr Warren Buffett.
It’s OK, go ahead. We’ll wait here while you do.
OK, we’ve already established that folks don’t have just one brain, they have three, and that the one right in the middle, the Lizard Brain, is the one that causes the most problems.
Do you know what Warren Buffett was doing while everyone was running for the doors in 2008? He was buying American, because that’s when it was the cheapest.
That’s because while the Lizard Brain only cares about eating, being safe and what everyone else thinks, mainly because status back when we lived in tribes was essential to survival, folks still overuse it when it comes to money.
Today I said I’d give you an example of classic Lizard Brain behaviour when it comes to money, and how to outsmart that thinking.
In 2008, when the recession was in full swing and the financial world was a mess we had:
- Unemployment was rising
- Business activity was falling, and
- The media was crafting headlines scarier and scarier headlines…and selling more newspapers for it.
Oh, and people (the tribe) were leaving the stockmarket (equities) in droves…in dollar amounts that rose from millions to billions to trillions.
Seven years and a number of record breaking highs later across popular indexes like the Dow Jones and S&P 500, and there’s still over $9 trillion sitting in deposit accounts afraid to go back in the water.
And that’s how the tribe gets poorer and poorer as it goes.
Because 2008/09 was not the first ever recession. These things come in cycles, and they’ll come again.
But the crashes aren’t the real problem. It’s how people before and after the crash that makes the difference.
The tribe generally behaves the same way each time this happens:
- They don’t get back into the markets until they feel completely safe – read: opportunity lost
- They get greedy and try to stay in too long – read: the media told me everything was still ok
- They bought high going in and sold low going out when the market was falling – read: you’re supposed to buy low and sell high, and
- Now they’re waiting again for the media to tell them everything is ok again – read: they’ve already missed out on seven years of rising values.
OK, if you haven’t been paying attention up until now I suggest you do so here.
Do you know what Warren Buffett was doing while everyone was running for the doors in 2008?
He was buying American, because that’s when it was the cheapest. And if you know anything about the billionaire named Buffett, he started in Omaha, Nebraska and made every penny himself by learning about value and generally doing things the crowd weren’t.
“A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful.” – Warren Buffett
And while we’re going to continue to talk about the Lizard Brain and how to outsmart it this week, that quote makes for a nice lead-in to next week’s discussion about fear.
So let’s not forget that no one ever succeeded in life or got wealthy by doing what everyone else does. It just doesn’t work that way.
That’s just your Lizard Brain talking and you listening to it.
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