Investment Consulting

Wednesday, August 13, 2014

What I learned losing a million dollars

What I learned losing a million dollars 

I recently read an article in Rankia from Gfierro with the title, "What I learned losing a million dollars." Luckily, the title of the post was not based on a lived history about Gfierro, but referred to a book by Jim Paul about their experience. The book's title is quite explicit and makes it quite clear what the issue goes, but the article did Gfierro even more appealing to me. I actually liked the article so much that I bought the book and now I'm finishing it. 
This is looking like a really interesting book, therefore, I have also decided to dedicate an article, only that in my case, the item is simply the translation of a portion of prologue.

What I learned losing a million dollars, Jim Paul 

The moral of the story you are about to read (What I Learned Losing a Million Dollars) is: success can be built on repeated failures when failures do not take it personally; similarly, you can build failure when repeated successes are taken personally. Thomas Edison failed 10,000 times before discovering the need to create a light bulb filament. The day his laboratory in Menlo Park burned to the ground, a reporter asked what he would do. "Starting tomorrow reconstruction" Edison said. In part, Edison succeeded because the failures and losses was not taken personally. Moreover we have Henry Ford, who admired Edison and worked with him. In 1905 Ford started from scratch and in only 15 years, built what was the largest and most profitable manufacturing company in the world. However, some years later, which seemed the most solid company that might exist was in trouble and lose money almost every year for two decades. Ford was known to hold fast to their opinions. Is it possible that the company lost so much money because they take their success personally and thought he could do no wrong? 

Customize success prepares people for a tremendous failure. It happens when you start to consider success as something entirely personal, a reflection of his skills instead of taking advantage of an opportunity, being in the right place at the right time or just get lucky. Those who take success personally think its only contribution on a project guarantee success. 

This phenomenon has received a lot of names: overweening pride, about confidence, arrogance ... but the way that success becomes personal and the process that precipitated the subsequent failure have never been clearly explained. That's what we have to do. This book is a case study of the classic story of entrepreneurs: the risk taker and he sees an opportunity, the bulb that lights up with an idea, the great growth almost toxic, mistakes and collapse. Our case is that of a trader, but as in all case studies and parables, the lessons learned can be applied in many other areas and situations. These lessons will help you, either dedicate yourself to markets or business. Both areas have more in common than first appears. In fact, the cover of Forbes magazine 1993 about 400 richest people in America had a quote from Warren Buffett says: "I'm a better investor because I am a businessman, and I am a better businessman because I am investor." If the elements for success can be transferred between markets and businesses, can also be transferred failure. 

We could study different success stories to demonstrate how success is customized as then comes the fall, but surely remember and learn best when the lesson is presented through anecdotes and is about a real person and his great loss. How big? The downfall of a 15-year career and the loss of over a million dollars in just 75 days. 


The conclusion I leave to those who want to read the book. In my case, is a book that has surprised me for good, but turns out that despite being written to a trader, it is equally valid and interesting for fundamental long-term investor.

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