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Being towards death

Heed not to the tree-rustling and leaf-lashing rain, Why not stroll along, whistle and sing under its rein. Lighter and better suited than horses are straw sandals and a bamboo staff, Who's afraid? A palm-leaf plaited cape provides enough to misty weather in life sustain. A thorny spring breeze sobers up the spirit, I feel a slight chill, The setting sun over the mountain offers greetings still. Looking back over the bleak passage survived, The return in time Shall not be affected by windswept rain or shine.
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Unveiling the veil of the fool's theory: Why do we always underestimate our own stupidity?

#读书摘要14
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This post is translated from Chinese into English through AI.View Original
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The text discusses the "Greater Fool Theory," introduced by Keynes, which explains why people often buy assets without regard for their true value, hoping that someone else (a "greater fool") will pay an even higher price. It categorizes foolish buying behavior into two types: emotional and rational. Emotional fools buy without understanding the game, while rational fools knowingly gamble on the presence of more naive investors. Several psychological factors contribute to this behavior: 1. **Fear of Missing Out**: People buy simply because others are buying, fearing they might be missing out on valuable information. 2. **Confirmation Bias**: Individuals tend to seek information that supports their beliefs while ignoring contrary evidence. 3. **Overconfidence**: Many believe they can outsmart others, which leads to poor decisions. 4. **Emotional Influence**: Emotions like greed and anxiety can override rational analysis, leading to impulsive purchases. An example is given of a person named Xiao Li, who, despite having investment experience, buys a stock based on hype without understanding its fundamentals, ultimately suffering losses. To avoid becoming the "last fool," the text advises: - Not overly relying on others' choices. - Considering opposing viewpoints. - Allowing time to reflect before making decisions. - Learning from mistakes rather than fearing them. Ultimately, the key is to discern whether one's decisions are based on genuine value or the expectation of a "greater fool" coming along.

You may have had this experience: you were quite clear-headed, but then saw everyone rushing to buy something, and suddenly your mind got heated. You thought, regardless of whether it's true or not, you should grab it first. When you came to your senses, you realized you actually didn't need it at all. Why does this happen? The "Greater Fool Theory" can explain our behavior.

Greater Fool Theory#

Also known as the theory of the biggest fool, it was proposed by Keynes in his 1936 publication "The General Theory of Employment, Interest, and Money." Here is a detailed introduction to the Greater Fool Theory:

Definition
In capital markets such as futures and securities, people completely disregard the true value of something and are willing to pay a high price because they expect that there will be a bigger fool who will pay an even higher price to take it off their hands. If there is no bigger fool to pay a higher price, then they themselves are the biggest fool.

Classification of Foolish Behavior

Emotional Foolishness: Acting without realizing that they have entered a game of foolishness, and are unaware of the rules and inevitable outcomes of the game.

Rational Foolishness: Clearly aware of the foolishness and related rules, and based on their judgment and analysis of public psychology, they believe that there are more foolish investors who will soon join in, which is why they invest money to take a gamble.

1. You are not buying a product, but the illusion that "someone will take over"#

This means: the reason you dare to buy is not because the product itself is valuable, but because you believe there will definitely be "a more foolish person" who will take over at a higher price. It's not that you genuinely believe in it; you just trust that others are more reckless. For example, the recent craze: labubu (no need to elaborate, I think everyone should have noticed it). This psychological mechanism appears not only in business, stock trading, and real estate but also in daily life. Speedily grabbing discount coupons, following trending topics, or even impulsively changing jobs—many times we are not relying on our own analysis, but rather observing how others are acting. Ultimately, the Greater Fool Theory is not just economics; it is also psychology.

2. Why do you fall into the trap of "the bigger fool"?#

  • First, everyone fears being left out
    Seeing others buy, even if you don't understand, you want to try it out, otherwise, you feel like you are "behind on information." This is simply following the crowd. You don't really trust the product; you just fear missing out.

  • Second, we tend to only pick what we want to hear
    This is called confirmation bias. Once you lean towards believing a certain outcome, you will unconsciously look for evidence that supports that outcome. For example, if you are interested in a stock and one person says it will rise, you immediately agree; if ten people say the risks are high, you act as if you didn't see it.

  • Third, some people are "overly confident" in themselves
    They always think they can be a step ahead of others and not be the last fool. But isn't that what everyone is thinking? The more someone thinks this way, the easier it is for them to fall into a trap.

  • Fourth, when emotions rise, rationality can't stop you
    You think you are "analyzing before acting," but many times emotions have already taken the wheel. Greed, anxiety, and luck all mix together, and in the end, what you buy is not a product, but a self-soothing expectation.

Case Study#

Xiao Li was quite stable, with a few years of investment experience and decent results. One day he came across a stock that was said to "have insider information and will surge," and many people were sharing it online. He didn't really understand what the company did and bought it directly. Because he believed, "Anyway, I'm not the last fool." At first, it did rise a bit, and Xiao Li felt a little proud, even thinking about increasing his position. But after a few days, the stock price plummeted. He didn't even have time to run; he watched helplessly as his account turned red. Later he said he hadn't understood the company's background at all, he was just afraid of "missing the opportunity." In fact, many of us may have encountered similar situations. Not just in the stock market, but elsewhere too. Sometimes people are not unintelligent; they just want to take a gamble that they can win.

Want to avoid being that "last one to take over"? Then you can only stabilize little by little#

  • Don't pay too much attention to "how others choose"
    Listening is fine, but don't take others' decisions as your navigation. Many times, others are just following others too.

  • Don't selectively read information
    Make sure to read the "opposing opinions" as well. Whether a choice is worth making often depends not on how much praise it receives, but on whether you can still accept it when it is questioned.

  • Leave some emotional buffer
    If you really want to buy or invest, don't rush to confirm. Wait a day or two, then come back and see if you are still impulsive.

  • Finally, don't fear making mistakes; fear not reflecting
    Making a mistake once is not embarrassing; the key is whether you can figure out where you went wrong. Everyone can stumble, but some people learn to navigate around it.

Can you avoid being a "fool"? Not necessarily. But if you really want to make fewer mistakes, at the very least, you need to be willing to pause and think: Am I seeing value now, or do I just think there is a "more foolish person" behind me? The answers are different, and the outcomes may be vastly different.

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