How do you stop spillover of certain value investing principles into your life?

[Mephistopheles]

We are all aware of good things that value investing has done for us outside of the investing world. The ability to think independently, think long term, be patient, learn from our mistakes etc. We have also learned many great values from Warren Buffett to apply to both business and our personal lives, such as integrity and honesty.

 

Having said all of that, there are definitely some value investing principles that I'd rather be free from in my personal life. For example, whenever I spend or lose money where I shouldn't have, it bothers me because I wired to think about the future value or use of capital of every dollar I have now.

 

A much more bothersome issue that I often face is always thinking about the downside when it comes to making decisions, and not nearly enough about the upside. Again, this is great when applying to stocks, but it can get depressing in real life.

 

I'm not sure if anybody else has had such issues. Would love to hear all of your thoughts.  :)

[beerbaron]

I would argue that i was who i am before i knew what value investing was. I just recently realized that most pleasures from buying stuff do not offset the displeasure of spending hard earned money. It is a virtue and a curse because you can never enjoy life at its full potential.

 

To conclude, value investing gave me the theory of buying cheap asset. Which is only an extension of not spending money, hence who i am

 

Beerbaron

[stahleyp]

This topic reminded me a post that Taleb put yesterday on Facebook:

 

"The problem with opulence: the more you pay for a service (meal, hotel, airplane ticket), the more dissatisfied you will be with the smallest imperfection, the slightest error.

Compare constipated old Park Avenue couples riding first class, for whom traveling is some kind of exercise in bitterness, to partying passengers in the back of the plane for whom any beer is "good enough". It is as if life wanted to get even with them.

Which leads to the paradox that the only way to properly enjoy wealth is to avoid spending it."

[Packer16]

I think value investing is a principle/discipline that you can apply to your own life but applying it to others in terms of relationships can cause issues.  The way I look at it is what is the purpose of life.  For me it is to serve others so some of the value investing principles do not apply at times.  If I get great service at a restaurant I want to provide a nice tip in return for the great service versus getting the best deal.  From the Old Testament there is a practice of gleaning a field, after the harvest letting others collect the harvest that is ground for free rather collecting it for yourself.  I think you can practice this gleaning principle while still being a value investor.  For me, the answer is what is how is value investing being used in the context of your life's mission. 

 

Packer 

[Parsad]

I think value investing is a principle/discipline that you can apply to your own life but applying it to others in terms of relationships can cause issues.  The way I look at it is what is the purpose of life.  For me it is to serve others so some of the value investing principles do not apply at times.  If I get great service at a restaurant I want to provide a nice tip in return for the great service versus getting the best deal.  From the Old Testament there is a practice of gleaning a field, after the harvest letting others collect the harvest that is ground for free rather collecting it for yourself.  I think you can practice this gleaning principle while still being a value investor.  For me, the answer is what is how is value investing being used in the context of your life's mission. 

 

Packer

 

+1!  Could not have said it any more eloquently.  Cheers!

[LC]

I find giving to charity helps, because it reiterates the point that SD regularly makes: money is the servant not the master. Pick a % or dollar amount to regularly donate that you can afford and stick to it, it's worked for me in terms of redefining the "value" component of value investing that goes beyond just money in a brokerage account. Pretty much the "tithing" principle that Packer mentioned...it's been part of human history for millennia because it adds value for society and for yourself.

[ukvalueinvestment]

If you're any good at compounding capital, doesn't it make sense to compound it over a lifetime and gift a greater amount to charity towards the end of your life?  Then you can do the most good.

[LC]

To me that depends...what does more good, feeding 1 hungry family today or 100 hungry families in 10 years? How the heck does one even answer that? I don't know and so I try to do a little of both, I suppose.

[ukvalueinvestment]

Obviously 100 families in 10 years.  There is no discounting when it comes to human misery/happiness.

[tombgrt]

Hm, I think it's entirely unlikely that you grow your money 100-fold over 10 years.

 

And how do you account for the fact that people that you help now can help other people later? Here is a true compounding effect worth mentioning. ;)

[Myth465]

Aw first world problems....

I just cant find the right meme for this one.

You are doing pretty well if you are pondering this question in the morning while drinking coffee in the morning.

 

(I am included, I was trying to work out the answer when I read the question for a while then thought about how unnatural it is for most of the world).

[oddballstocks]

I give now, the impact is now, not some future time that we have no control over.  We do have control over the now.

 

Here's a story that drives this home.  Some good friends of my parents were excellent savers.  The guy was cheap to a fault, wore old clothes until they fell apart, drove old cars until they fell apart, just saved and invested.  He grew a giant nest egg.

 

They're 60 now and his wife has quickly advancing Alzheimer's, so much for living to old age spending down the nest egg.  She has trouble remembering much of life right now.  He had a change of heart, he realized that saving to just save for some future fantasy is just that, it's a fantasy.  He drove his 20-yr old rusty Ford Focus to a Porsche dealership and bought a car with cash on the spot.  His quip to my mom was that he realized he needs to enjoy what he saved now, nothing is guaranteed.

 

In my view living a balanced life is key.  Save and be prudent, but also enjoy life now.  We never know if we'll be able to enjoy the future.

 

In terms of charity here's something to think about.  What seems like a small amount to most of us is usually a large amount to the receiver.  So the server at a restaurant, maybe they make $15/hr, if you leave an extra $5 tip you just increased their hourly earnings by 30%.

 

 

[SharperDingaan]

Some things to be mindful of:

 

You are applying a technique that takes you from poor (youth) to wealthy (grandpa) over a lifetime. Keys to the entire thing; are (1) ability to recognize your place in the time/process - as it is occurring, & (2) recognition that wealth is multi-dimensional - not just the size of your portfolio. Its not hard to recognize those who are good at it.

 

The advantage of youth is nothing to lose, & everything to gain (same as when you started investing). They need to be aggressive, in your face, thrown into the world without safety nets, roughed up, & allowed to fail. Most are going to get beat-up at first, find equilibrium, & then come back attacking. Your job is to let it happen, then quietly direct.

 

The very good will attract followers (natural leaders), be very aggressive, & almost certainly business orientated - your job is to show it is far more profitable to be on the right side of the law. Success, or failure, your investment is probably going to go far - & along the way there will be lessons from both. Any team with the next Bill Gates as its CEO, an Al Capone as CFO, & Machiavelli as consigliere is bound to do well.

 

Periodically remind yourself as to what wealth actually is - by giving a randomly chosen homeless person 1-2K in cash, & quietly watching what they do with it. You would be surprised at how many either give the cash away to others as food, drink, etc. - or simply burn it.

 

SD

 

 

 

[ERICOPOLY]

I don't know, but if you buy a Tesla you'll not only have a blast driving it around, but you're investing in the planet at the same time (the more that are purchased... the sooner GM itself will mass-produce long-range electric cars... and the sooner we get off of oil dependency).

 

My entire adult life (I was 17 when the US got involved in Iraq-Kuwait) has been tainted by nearly constant war.  I can only hope that by the time my children are adults we've put an end to oil wars.

 

It's just... you can spend the money on yourself while serving a greater cause at the same time.  Yes, I could have spent $40,000 less and hoarded the extra cash... prudent?

 

Or perhaps I've just found a self-serving way to "give" -- created jobs in California (my local community) while also hopefully cutting down on future violence (oil wars), and meanwhile perhaps being on the right side of the carbon debate (future generations).  In doing so, I'm also having a great time.

 

However, I don't get my name put on a placard... there is no ribbon cutting ceremony... I'm not hailed as a great philanthropist with my name on a foundation...  well, my ego will just have to survive by gaining socially elevating points some other way.

 

Or if there is a job at home that needs to get done, pay someone to do it.  Creating a job in your community is not shamefull -- sure you could clean your own house and your work ethic makes you feel guilty for giving the job to another.... but why don't you go on a strenuous hike instead?

[premfan]

We are all aware of good things that value investing has done for us outside of the investing world. The ability to think independently, think long term, be patient, learn from our mistakes etc. We have also learned many great values from Warren Buffett to apply to both business and our personal lives, such as integrity and honesty.

 

Having said all of that, there are definitely some value investing principles that I'd rather be free from in my personal life. For example, whenever I spend or lose money where I shouldn't have, it bothers me because I wired to think about the future value or use of capital of every dollar I have now.

 

A much more bothersome issue that I often face is always thinking about the downside when it comes to making decisions, and not nearly enough about the upside. Again, this is great when applying to stocks, but it can get depressing in real life.

 

I'm not sure if anybody else has had such issues. Would love to hear all of your thoughts.  :)

 

Value investing is an intellectual game.  The game has no inherent meaning. More money doesn't solve problems. The world is flushed with cash. Use your intellect to take( right assumptions) your share.  The process should be fun. Finding gems is fun. Turning dirt into diamonds is fun. Don't stress over wealth.

 

If not fun, you don't enjoy the process. You are too outcome focused and its a sign to make it fun ( paradigm shift) or find something to do that's fun. The ego might be forcing you to do something that is not fun.  There might be a pressure to obtain wealth or worldly wisdom. This is the ego's language. Never listen to the ego. Focus on the heart center and any process that's fun.  The side effect is an satisfactory outcome.

[premfan]

I think value investing is a principle/discipline that you can apply to your own life but applying it to others in terms of relationships can cause issues.  The way I look at it is what is the purpose of life.  For me it is to serve others so some of the value investing principles do not apply at times.  If I get great service at a restaurant I want to provide a nice tip in return for the great service versus getting the best deal.  From the Old Testament there is a practice of gleaning a field, after the harvest letting others collect the harvest that is ground for free rather collecting it for yourself.  I think you can practice this gleaning principle while still being a value investor.  For me, the answer is what is how is value investing being used in the context of your life's mission. 

 

Packer

 

Great post! The key point I like is obtaining wealth is only meaningful depending on the context of the person's life mission. Context adds meaning. Making money for money's sake is boring and not sustainable without a congruent context.

[ASTA]

What really changed my mind on spending money was  when I went to Nice for holiday and went to Etap(Ibis light) 60 euros a night hotel and there was no soap in the room. So as much as I love to save money I am going to spend a bit more on hotels from now on :D I think that the game of saving is fun and wont stop on that but I don't see me going to no soap 60 euro hotels anytime soon.

[cobafdek]

there are definitely some value investing principles that I'd rather be free from in my personal life.

 

I would ask why you would NOT want value investing principles to spillover everywhere.  It all depends on how broad is the concept of value.

 

If your wife wants that expensive dress and shoes, you buy it for her because that dollar figure pales in comparison to the value of your relationship with her (what it says about her is another matter - let's not go there!)  It's another form of value investing:  you're getting value for value.

 

This message board is a big tent.  We're all value investors here, from those who buy the scuzziest third-world net-net to those who buy Amazon and Resverlogix.  Might as well expand that to include your wife's clothes, shoes, and Boxster.

 

As Epictetus says, "It is impossible for a man to think that a thing is advantageous to him, and not choose it."

[NoCalledStrikes]

I know Warren is talking his book at the AGM when he says that the highest ROI he ever gets is from buying jewelry at Borsheims to give to his wife, but there is some truth in that.  Hey, some of that jewelry he bought her in the mid-60's could have easily cost 500 shares back in the day or a cool 100 million in today at 200K/share, but there is no prize for being the richest man in the cemetery.

[Mephistopheles]

Thanks all for the replies, these are all good points. Actually, with the money thing it doesn't affect me as much as it might have seemed like considering I listed it in my post. I am not afraid to spend when it adds value, though I try to be wise about it. But when it comes to unwise purchases, that's when it really bothers me because of with Future value/present value concept. Perhaps I am just unforgiving of myself when it comes to mistakes.

 

The bigger problem for me, though, is my 2nd listed point - and that is "always thinking of the downside and letting the upside take care of itself." With stocks, I am constantly playing devil's advocate against my own investments and it's proven to be a great security (no pun intended) measure. But this can be depressing in life when making semi-major or major decisions. Although I've had a natural inclination towards frugality, this obsessing over the downside is something I trained myself to do in order to become a better investor. But then I keep doing it for non-investing related decisions. Of course, you shouldn't be a blind optimist either, but you need more of a balance between optimism and pessimism in life, more so than in investing.

 

Does this happen to anybody else?

[cobafdek]

With stocks, I am constantly playing devil's advocate against my own investments and it's proven to be a great security (no pun intended) measure.

 

I recently read "The Wisdom of Insecurity" by Alan Watts.  Perhaps it will hit the spot.

 

http://www.amazon.com/Wisdom-Insecurity-Message-Anxiety-Vintage/dp/0307741206/ref=sr_1_1_ha?s=books&ie=UTF8&qid=1408168744&sr=1-1&keywords=the+wisdom+of+insecurity

[frugalchief]

 

Value investing is an intellectual game.  The game has no inherent meaning. More money doesn't solve problems. The world is flushed with cash. Use your intellect to take( right assumptions) your share.  The process should be fun. Finding gems is fun. Turning dirt into diamonds is fun. Don't stress over wealth.

 

If not fun, you don't enjoy the process. You are too outcome focused and its a sign to make it fun ( paradigm shift) or find something to do that's fun. The ego might be forcing you to do something that is not fun.  There might be a pressure to obtain wealth or worldly wisdom. This is the ego's language. Never listen to the ego. Focus on the heart center and any process that's fun.  The side effect is an satisfactory outcome.

 

 

Learning about value investing has changed my thought habits.  It's only been about 5 years since I discovered the truth of investing (value investing).  I used to get emotional about stock prices and day trade...which was a disaster...but finally the scales fell from my eyes, and I enjoy it when prices drop now.  Being young, I'm in it for the next 50+ years, so I'm in me net saving mode. 

 

I've utilized many of the principles in my business life and personal - patience being one of primary ones.  In a world full of "me, me me...now, now now" it allows me to bide time and sit back and watch a good decision slowly transform into something great....while other panic.

 

The process can be slow, but sitting and waiting for the fat pitch is fun and exciting.  I realize I won't become wealthy overnight, but it will be a fun journey that takes some time.

 

My business life is in the real estate market.  I see way too many emotions regarding the purchase of an investment - all the wrong ways to think of investing.  It's really fun to watch the markets reactions, while sitting back and waiting for the slow, fat pitch.

 

Cheers!

[Guest longinvestor]

 

Value investing is an intellectual game.  The game has no inherent meaning. More money doesn't solve problems. The world is flushed with cash. Use your intellect to take( right assumptions) your share.  The process should be fun. Finding gems is fun. Turning dirt into diamonds is fun. Don't stress over wealth.

 

If not fun, you don't enjoy the process. You are too outcome focused and its a sign to make it fun ( paradigm shift) or find something to do that's fun. The ego might be forcing you to do something that is not fun.  There might be a pressure to obtain wealth or worldly wisdom. This is the ego's language. Never listen to the ego. Focus on the heart center and any process that's fun.  The side effect is an satisfactory outcome.

 

 

Learning about value investing has changed my thought habits.  It's only been about 5 years since I discovered the truth of investing (value investing).  I used to get emotional about stock prices and day trade...which was a disaster...but finally the scales fell from my eyes, and I enjoy it when prices drop now.  Being young, I'm in it for the next 50+ years, so I'm in me net saving mode. 

 

I've utilized many of the principles in my business life and personal - patience being one of primary ones.  In a world full of "me, me me...now, now now" it allows me to bide time and sit back and watch a good decision slowly transform into something great....while other panic.

 

The process can be slow, but sitting and waiting for the fat pitch is fun and exciting.  I realize I won't become wealthy overnight, but it will be a fun journey that takes some time.

 

My business life is in the real estate market.  I see way too many emotions regarding the purchase of an investment - all the wrong ways to think of investing.  It's really fun to watch the markets reactions, while sitting back and waiting for the slow, fat pitch.

 

Cheers!

Great that you're in it for 50 years and have imbued patience at a young age. I've learned that through failure myself. Congratulations!

 

Just a suggestion, when you have enough of a track record, consider sharing your results and approach with your friends. What you'll have is rather uncommon, as you probably are aware already.

[frugalchief]

 

Great that you're in it for 50 years and have imbued patience at a young age. I've learned that through failure myself. Congratulations!

 

Just a suggestion, when you have enough of a track record, consider sharing your results and approach with your friends. What you'll have is rather uncommon, as you probably are aware already.

 

Thanks longinvestor!  I've only got a 3-yr track record (since I started tracking my net worth & investments).  It is difficult "going against the crowd" in todays world but I know it will pay off long-term.  It's extremely difficult to do, but part of the value investor mentality is that I don't pay attention to "keeping up with the Joneses."

 

Speaking of...I'm sure this has been spoken about before, but it really hit home (again) and reconfirmed my conviction of a part of what value investing is about and how I use its principles in life.  I was re-reading Snowball about WB last week...WB quoted on page 33:

 

"If the world couldn't see your results, would you rather be thought of as the world's greatest investor but in reality have the world's worst record?  Or be thought of as the world's worst investor when you were actually the best?"

 

It's about living with the intention of having an Inner Scorecard, not an Outer Scorecard.  "If all the emphasis is on what the world's going to think about you, forgetting about how you really behave, you'll wind up with an Outer Scorecard."

 

WB continued, "He [Howard Buffett] just didn't care what other people thought.  My dad taught me how life should be lived."  So we should thank Howard Buffett (and Graham) for imparting such wisdom on us??!! 8)

[SharperDingaan]

Long ago we reminded our nephews of the negative effect when a well above average, very successful man moves into a richer neighbourhood (Taleb). As the poor guy - you (or your spouse) is made to feel a failure, & you will become one ... if you play the game set up for you. But change the game, & Lenny - you are the fox in the hen house!

 

After that, there were never any further issues.

 

SD