Personal Finance 

Early Mistakes are Lessons in Disguise

Email  Print Print  

Last night I had dinner in San Francisco with J.D., his lovely wife, and Cap and we somehow got on the topic of how JD made the fantastically not awesome decision to buy Sharper Image. Cap lamented about how he was poor and didn’t invest in stocks (to be honest, I forgot what he said so I put in a typical Cap comment :)), I chimed in about how I erroneous Worldcom (I said Enron earlier but I got the two mixed up) on bad news but that it was a good lesson for me.

That got me thinking to something my father told me many years ago. He said, and I’m paraphrasing, that you either learn a lesson in the classroom or you learn it in real life, the one in real life is far more expensive (in both time and money) and dangerous. The best analogy I can think of were the “fights” I saw on the fraternity quad in college. Ever see two “tough guys” step up to each other, bump chests, and challenge each other? That, in part, goes back to when people would fight for territory and weakness meant someone else was going to swoop in on your livelihood.

On the fraternity quad of a private engineering school, you probably didn’t learn the lessons of the street growing up and probably didn’t realize that if you bumped up against the wrong chest, you’d be floored. In the fraternity quad of a private engineering school, the chest puffing stopped at just that, chest puffing.

Then my friend Howard from New York City showed up, a real cool Asian kid who stood all of 5′ 7″, but he had street smarts; where he came from, chest puffing and “go ahead, hit me” statements were soon followed by the very thing you asked for. One night he had a run in with some punk, there was shouting, some “go ahead, hit me”s were thrown around, and he swung. The guy didn’t fight back, but bless his bravado, he said “hit me again!” And he did. And again. Until the guy ran. (He later returned with five of his fraternity brothers, at which point we called him a [not nice name] and told him to [go home])

That other guy, he got a lesson he should’ve learned in the classroom – don’t pick a fight if you aren’t going to fight. Howard used his fists, depending on the street and the circumstances, it could’ve been clubs, knives or guns. The other guy got off cheap.

After that little trip down memory lane, it struck me, losing money on Worldcom was very good for me. At the time it was catastrophic, a loss of a thousand dollars in a Roth IRA that had only three or four; but it taught me that I really need to do a lot more due diligence before I’d be ready to invest any money in individual stocks. Due diligence is not an hour reading news stories, due diligence is poring over financial records, understanding how markets price stocks (biggest lesson is that it’s about growth, not intrinsic value; don’t quote me though because I’m terrible at investing), and a whole pantheon of factors I can’t even begin imagine, let alone enumerate. That’s precisely why I like index funds (though I’m waiting for the research that says index funds suck, you know it’s coming!).

That thousand dollars has probably saved me countless dollars over the years since and it definitely was the main reason why I didn’t buy Bear Stearns this past month.

Those who cannot remember the past are condemned to repeat it.
                — George Santayana, Reason in Common Sense

{ 6 comments, please add your thoughts now! }

Related Posts

RSS Subscribe Like this article? Get all the latest articles sent to your email for free every day. Enter your email address and click "Subscribe." Your email will only be used for this daily subscription and you can unsubscribe anytime.

6 Responses to “Early Mistakes are Lessons in Disguise”

  1. Chuck says:

    My co-worker Mike likes to refer to these “lessons” as “tuition.”

  2. GBlogger says:

    Nice post. I’m not quite sure if you’re saying it’s better to learn these lessons in the classroom or in real life… or not making a judgment on that? I think it’s good to learn some of these lessons in real life, so long as it’s not a ruinous result! I think you learn lessons in real life better and remember them longer.

  3. jim says:

    Personally, I think learning the lesson in the classroom, in a “controlled setting,” is preferable but many times we don’t get the option. Sometimes, we “learn” in the classroom but the lesson doesn’t stick… just wanted to highlight the idea and not make any judgment.

  4. “That other guy, he got a lesson he should’ve learned in the classroom – don’t pick a fight if you aren’t going to fight. Howard used his fists, depending on the street and the circumstances, it could’ve been clubs, knives or guns. The other guy got off cheap.”

    That’s a great lesson. One not too many of us learn easily.

  5. Will says:

    I started working in March 1999 and, as a tech enthusiast who’s been using the Internet since it really started taking off, I was really convinced that Internet companies could do no wrong and would teach “old school companies” a thing or two. Long story short, I “invested” some money in one of those companies (in hindsight, “gambled” is more likely more accurate), and never saw the color of that money again. I never forgot that lesson, to the point where now I tend to fall prey to analysis paralysis. That’s why I didn’t buy Google (still kicking myself for this one) and I’m still resisting buying Apple even though it cooled down seriously (I really think it will go back up).

    My point is, lessons you learn in the trenches stick with you for an awful long time.

  6. Cap says:

    What I said was “I did a poor job choosing certain individual stocks.” Hah!

Please Leave a Reply
Bargaineering Comment Policy

Previous Article: «
Next Article: »
Advertising Disclosure: Bargaineering may be compensated in exchange for featured placement of certain sponsored products and services, or your clicking on links posted on this website.
About | Contact Me | Privacy Policy/Your California Privacy Rights | Terms of Use | Press
Copyright © 2016 by All rights reserved.