Friday, March 13, 2009

Madoff – Villain or Teacher?

Lesson for the day
Anger is a normal human reaction. Hard-wired to make us react in ways which we believe to be rational. We all struggle with the same conundrum – how to react when ripped off or hurt by another party?

Madoff is the villain of the day, because yesterday it was Wall Street or John Thain and his $1 million bathroom renovation. Before that we had the greedy subprime lenders (remember the outcry about Mazilo’s VIP loan program) and way before that were the Enron and Worldcom crooks …

There is always someone out there looking to make a quick buck. And when you are on the other side of the transaction – it hurts. It is painful, unfair and financially disastrous. I resented my dot com loses and blamed the broker, the media, regulators and finally myself.

The reality is - I decide what to do with my money, where to invest and who to trust. If I make a bad decision – I face the consequences. I can resent the outcome, blame the whole world and seek revenge but what does that buy me. Some mental solace, a feeling of "getting even" and maybe some closure. In my mind this tendency to dwell on revenge is a waste of time.

So what should one do? First – get over the revenge urge. Vent, punch a bag, meditate … get over it. Then dwell on it. Dwell on the situation. What happened? What went wrong? Why did it go wrong? What were the red flags which were ignored? What due diligence was lacking? Understand the root cause of the problem. If you don’t know what went wrong – how do you intend to improve?

If your stock portfolio is down – you may want to complain about the idiosyncrasies of the market but post that you are better off trying to understand why are you invested in the market, how you are invested and what is working or not working for you. Idle water cooler chit chat on where is the market bottom does not lead to better investment decisions. Deliberate reflection on what you did, why you did and how you can improve is what counts.

And finally – move forward. What is done is done – learn from it and move forward. Therein lays the opportunity to leverage your failures and learning to reap bigger rewards.

“I also have a belief that we need to look forward as opposed to looking
backwards... My orientation is going to be to move forward”
Barrack Obama

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