{"id":3327,"date":"2015-08-18T10:39:15","date_gmt":"2015-08-18T17:39:15","guid":{"rendered":"https:\/\/masonmyers.com\/?p=3327"},"modified":"2015-08-25T13:58:08","modified_gmt":"2015-08-25T20:58:08","slug":"rational-investing-vs-irrational-entrepreneurship","status":"publish","type":"post","link":"https:\/\/masonmyers.com\/rational-investing-vs-irrational-entrepreneurship\/","title":{"rendered":"Rational Investing vs Irrational Entrepreneurship (Admirable Idealism)"},"content":{"rendered":"

When asked at this year’s meeting, “What matters most at Berkshire Hathaway?” \u00a0Charlie Munger and Warren Buffett quickly agreed: “Seeing things the way they are.”\"keep<\/p>\n

Rational As Opposed to Smart<\/h3>\n

Warren and Charlie then went to\u00a0one of their favorite topics about how the success of Berkshire hinges on their ability to be “more rational” than others. \u00a0Charlie explained, “We are good at being rational. \u00a0Our main duty is to be as rational possible. \u00a0It is a moral duty. \u00a0Confucius said it is dishonorable to be more stupid than you have to be.”<\/p>\n

This is a theme that has been present in many of their interviews, books and speeches over the years. \u00a0They believe that each of us has a responsibility to keep learning and to keep getting wiser and more rational. \u00a0Note that they use “rational” as the opposite of “stupid” (rather than the opposite of stupid being “smart”). \u00a0This is intentional as they often say that intelligence can be a disadvantage and can lead people to do stupid things. \u00a0To them, life success is more about being wise and rational than smart.<\/p>\n

Rational Investing and Entrepreneurship, Different Yet Similar<\/h3>\n

For me, these comments prompt thoughts about the differences, and similarities, between being a good investor and a good entrepreneur. \u00a0Neither is better or worse than the other. \u00a0They are just different. \u00a0Each of us may focus on such different skills at different times in our life, or different moments in our same job. \u00a0We all must find a balance between these effective mindsets. \u00a0As an investor, it is important to watch the world happen and seize on opportunities. \u00a0In a sports analogy, you should take what the defense gives you. \u00a0Do not try and force a personal belief or hypothesis on the world. \u00a0Do not fool yourself or fall in love with an idea. \u00a0Do not fall into\u00a0confirmation bias. \u00a0Focus on seeing the world as it is, seeing things as they are, and then utilize an incorrectly priced asset, a misallocation of risk, or another opportunity to your advantage.<\/p>\n

As Benjamin Graham wrote, use Mr. Market to your advantage rather than as your guide. Learn the\u00a0skill to be patient enough to watch and react (and remain disciplined enough to react only when the opportunities are particularly good). Use rational investing as an advantage.<\/p>\n

Entrepreneurship is often described as “changing the world” and thereby putting the stamp of your idea on the world. \u00a0It is the art of seeing things the way they COULD\u00a0be. \u00a0It is being proactive, not reactive. \u00a0Entrepreneurship may require more outward convincing of others of the opportunity — rather than the investor being able quietly to make his move without having to convince anyone else.<\/p>\n

Yet, at the same time, one could look at the best entrepreneurs as shades of the best investors and vice versa. \u00a0They see an opportunity that does not seem as risky to them as to the rest of the world. \u00a0They take rational risks to move their idea forward, not gambles that bet the company. \u00a0They assess the risk and reward of a new opportunity and deem it worthwhile. \u00a0Even the most aggressive entrepreneurs have the wisdom to be patient at times. \u00a0Entrepreneurs need to be idealistic to get themselves and others motivated about the opportunity, yet realistic with themselves about “seeing things the way they are” today so they can plot the best course possible toward the ideal state they are seeking.<\/p>\n

Two up and two down<\/h3>\n

I have been all of the above in my life: A) an irrational (and too hopeful) an investor which is the most damaging sin as an investor, B) an irrational entrepreneur (when I was too young to know any better), C) a rational investor, and D) a rational entrepreneur. \u00a0Better results come from the last two than the first two.<\/p>\n

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