Same as Ever: A Guide to What Never Changes

by Morgan Housel

Unexpected hardship makes people do and think things they’d never imagine when things are calm. Your personal views fall into the same trap. In investing, saying “I will be greedy when others are fearful” is easier said than done, because people underestimate how much their views and goals can change when markets break. The reason you may embrace ideas and goals you once thought unthinkable during a downturn is because more changes during downturns than just asset prices. If I, today, imagine how I’d respond to stocks falling 30 percent, I picture a world where everything is like it is today except stock valuations, which are 30 percent cheaper. But that’s not how the world works. Downturns don’t happen in isolation. The reason stocks might fall 30 percent is because big groups of people, companies, and politicians screwed something up, and their screwups might sap my confidence in our ability to recover. So my investment priorities might shift from growth to preservation. It’s difficult to contextualize this mental shift when the economy is booming. And even though Warren Buffett says to be greedy when others are fearful, far more people agree with that quote than actually act on it. The same idea holds true for companies, careers, and relationships. Hard times make people do and think things they’d never imagine when things are calm.