I gave up watching television years ago. There was simply too much garbage on television and based on what I’ve heard from the last year, it seems to have gotten worse.
Years ago, I used to enjoy watching shows about finding Bigfoot. I don’t know why, but those shows were just so damn silly you almost pulled for them to be real. I was also always impressed how they could squeeze so much content from something that everyone knew wouldn’t happen. No matter how much they searched, they would never find this weird creature.
Yesterday, I actually saw a Bigfoot warning side on the side of the road and it got me thinking. Since today is Tuesday (I try to write about money or investing on Tuesdays) I thought it was only appropriate to write about another legendary creature that is impossible to find. The monocausal, or more accurate, the monocausal explanation.
When something is monocausal, it means there is a single cause. It’s basically a situation where X was caused by Y and nothing else. This is almost never the real case.
A simple case in point. Last Thursday morning at about 5am, I wrote about Africa and mentioned what I thought about Jumia (JMIA). That day, it went up 15% and today is up well over 20% from that point (from $41 to $52). I jokingly told a few people that I am a market mover.
Now, we all know how crazy that is because as much as I have enjoyed the newsletter, I do not have millions of followers. But what if I had? What if by some weird occurrence, the national media would have picked up my newsletter that day and I would have gotten 10M followers.
If I did, some people would have instantly attributed my article as being the cause of JMIA going up. For some, they would have taken two events that are completely unrelated event and tied them together. The next time I wrote about a stock, they would have immediately bought it. This is how bad decisions start.
I’ve said this a lot but humans are silly little creatures and we do silly things all the time. One of those things is to try to find a cause for everything and usually, our caveman brains pick something far too simple.
But in investing, as in life, there are rarely any major events that have a single cause. Thinking there is will cost you a whole lot of money.
One of the biggest differences between amateurs and professionals is that amateurs think what they are doing is easy. Whether it’s an athlete or a college business major, young people tend to think they have it figured out. I can count dozens of young people who have told me they have some secret formula for figuring out the stock market (or football gambling). In every case so far, they have all been wrong.
Professionals know better. In fact, the more I know about investing the less likely I even try to come up with this secret algorithm. The more I learn, the more I realize how big this universe is. Think of “experience” as a giant bottle of Windex on the window of life.
The next time in investing you try to find the reason, take a step back, and try to appreciate how big the global economy is, and how many people with real money are pulling levers up and down. It’s fun to think that you could google enough to learn some inside secret as to why something happened so you can prepare next time, but this is a huge trap. People far smarter than us are paid a whole lot of money to make you believe you can outsmart the system.