Risk & luck, Personal experience

 Many geniuses, who are rich in this world, are often not wealthy. Staying wealthy is a blessing in disguise, and it only works when you know doing well with money has nothing to do with how smart you are and have a lot to do with how you behave with it, which is very difficult to learn, even to many smart geniuses. Bookish knowledge teaches you to be academically excellent to become wealthy men but that is not the whole truth. You need to be psychologically well behaved too. And the one who started taking it for granted and loses control of their emotion can be a financial catastrophe. Ordinary men, who are not financially educated, can be wealthy if they have a handful of behavioral skills in terms of saving money. Technically it does sound a rocket science but it is how it works in the real world.

Your personal experience with money make up maybe .0000000001% of what’s happened in the world, but maybe 80% of how you think the world works - 

Do whatever you want to do with your money and try to be less judgmental about what others do with their money because there is no one crazy. I'll tell you how. People from different backgrounds, raised in a different economy, held different values, experiencing different jobs, different markets, and whatnot learn a very different lesson. Everyone has their own experience of how the world works therefore held different views of how money works. It varies from person to person, and what you experience is more absorbing than what you learn with bookish knowledge.

A simple example is that you see the system of lottery and how it works. For mediocre and high-income household people they don’t buy it. For them, it is a stupid way to make money and seems crazy. But poor people, who couldn't afford to have daily bread and couldn't come up with the money in an emergency, buy a lottery ticket. It seems crazy to us because I'm not in a low-income household and neither are you. So it’s hard for many of us to understand the reasoning of low-income lottery ticket buyers. If you imagine that it is going something like that, low-income households who live paycheck to paycheck, can't afford to save them money, can't have a nice vacation, can’t afford health insurance or homes in a safe neighborhood. And for them buying a lottery ticket is the only opportunity to hold the dream of getting the good stuff. We may not understand it because we are already living the dream. But they are buying the dream.

You don't need to agree with this example because buying a lottery ticket is still a bad idea but you can understand how their mind works.

So deciding with money is much difficult.  And people tend to decide with money by taking the information they have at the moment. Moreover, we know the money has been around for a long time and why there is much misbehavior with it because the concept of saving and investing is based on the concept that is practically infant. In earlier times, the labor force participation rate of men age 65 and over was 50% but as time passes it went down to 22% in 2010. Why? Because social security aimed to change it as the concept of saving and investing was missing. There was a general belief that “everyone used to have a private pension” but this was a misrepresentation. Only 1/4^th of that age 65 or older had a private pension. It was not until the 1980s that the idea of dignified retirement took place. And the way to get that dignified retirement is to save money and invest it in a right place. But unfortunately, many of us are bad at saving and investing for retirement. Also it should surprise no one because we all are newbies at it.

We all do crazy stuff with money because we’re all relatively new to this game and what looks crazy to you might make sense to me. But no one is crazy—we all make decisions based on our own unique experiences that seem to make sense to us in a given moment.

Risk and luck are doppelgangers.

There is a significant role of luck and risk in our financial investment. Luck and risk both are like siblings.

Luck and risk are like you can’t have a picnic without ants. So you not only pay your respect to luck but also to risk, and you realize that when judging financial success, it’s never as good or as bad as it seems. They both happen because the world is too complex to allow 100% of your actions to dictate 100% of your outcomes. There are so many confounding variables that one accidental impact of another can change your consciously taken decision. Therefore both are hard to measure and sometimes they often go overlooked. Bill Gates once said, “Success is a lousy teacher. It seduces smart people into thinking they can’t lose.”  Yes, it is true, sometimes when your decision goes south even if it seems all perfect, you started feeling demotivated but the truth is it is just a reflection of the unforgiving realities of the risk. And the best way to deal with the failure is you started arranging your financial life in such a fashion that your bad investment and missed failure goal won't wipe you out.

Altogether it is more important that we start recognizing the role of luck and risk in terms of success and failure.