Buzz
Each of us has a unique combination of abilities that contribute to our achievements. At times, though, luck also plays a part. Personal finance expert Carl Richards explains that 'lucky fool syndrome' can lead us to make unwise decisions, particularly when it comes to investing.
The psychological term for 'lucky fool syndrome' is self-attribution bias. When things go well, we credit our success to our skills. When things go poorly, we blame it on bad luck.
The issue with this: by downplaying luck’s role in our achievements, we risk overestimating our capabilities. When we attribute our failures to chance, we may miss out on valuable lessons.
This mindset can be risky in various financial decisions, but Richards specifically highlights investing. He refers to the book Fooled by Randomness, where Nassim N. Taleb discusses the concept of 'lucky fools.'
Lucky fools are completely unaware that they belong to this category — by definition, they don't realize they are one. They will behave as if their success is fully deserved. Their continuous streaks of wins will boost their serotonin levels so much... that they will even deceive themselves into thinking they can outperform the markets.
To avoid falling into this pattern, Richards recommends honestly evaluating your own abilities. In the context of investing, he advises asking yourself: Can I lose on purpose? He points out that intentionally losing is harder than it seems and requires some skill. For a deeper dive into 'lucky fool syndrome,' be sure to read the full post.
Photo by Tax Credits.
