EC Boredom: An Investor’s Last Remaining Edge?

“Win or lose, everybody gets what they want out of the market. Some people seem to like to lose, so they win by losing money.”

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People say they want to make money in the stock market. But in reality, it’s far more complicated. Humans crave action, whether it’s running from a big cat in the African Sahara or buying that hot new stock your gym buddy can’t stop mentioning. In our brains: action = good, inaction = bad.

So much so that we’d rather harm ourselves than sit alone with our thoughts. Read that sentence again.

It’s easy to see how we (the investor) harm ourselves to compound investment capital over the long term.

Yet, there are countless examples of great investors choosing to do nothing. Their ability to do nothing hangs on three principles:

  1. Set The Highest Bar For New Ideas
  2. Preoccupy Yourself with Other Work
  3. Bet Only On The Highest Asymmetric Ideas

Look around.

The entire investment world thrives on activity and commotion. Zero-commission trading turns investing into a sport. Ill-chosen LPs want decisions to justify management fees.

The best investors are the ones that have an unnatural ability to choose inactivity. As crazy as it sounds, boredom is an investor’s last remaining competitive advantage.

People Choose Physical Pain Over Boredom

Humans are fascinating creatures. We can think deeply about concepts beyond our own experiences. We can paint alternate pictures of reality and the future, engage in probabilistic scenario analysis and recall memories with ease. The scientific word for this phenomenon is “default mode processing.”

But in 2014, social psychologist Timothy Wilson posed two questions:

  1. Do people choose to put themselves in default mode by disengaging from the external world?
  2. When they are in this mode, is it a pleasing experience?

To answer these questions, Wilson conducted a series of 10 experiments. Participants ranged from college students to the elderly (77+). In the first study, the participants did a 6-15 minute “thinking session.” No phones, no external stimulus. Alone with their thoughts.

The first study revealed that 58% of participants found it difficult to concentrate. 89% said their mind wandered during the 6-15 minute session. And ~50% of participants said they didn’t enjoy the experience.

Let’s focus on the tenth (and last) study. In the tenth study, Wilson introduced an optional negative stimulation. In other words, participants had two choices:

  1. Sit alone with their thoughts.
  2. Hurt themselves via electric shock

Here’s the exciting part. Wilson gave each participant $5 and asked them to gauge how much they would pay to receive the electric stimulus after experimenting.

The results were incredible (emphasis mine):

“Many participants elected to receive negative stimulation over no stimulation—especially men: 67% of men (12 of 18) gave themselves at least one shock during the thinking period [range = 0 to 4 shocks, mean (M) = 1.47, SD = 1.46, not including one outlier who administered 190 shocks to himself], compared to 25% of women (6 of 24; range = 0 to 9 shocks, M = 1.00, SD = 2.32). Note that these results only include participants who had reported that they would pay to avoid being shocked again.

Read that last sentence again. The results were from those that would pay to avoid being shocked. Imagine the percentage if the study included those that would pay to get shocked.

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Disclaimer: All statements are solely opinions and are for educational purposes only.

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Erikas Ivan 3 days ago Member's comment

Oh definitely, the more I say NO myself, the better! Only a grinning YES will do!