9. Those who like to take risks are always “leeks” in the end…
In urban legends, taking risks is always jumbled together with “bravery”. This sort of mixing up of concepts might not be too risky in daily life, but in trading markets this sort of mixup is often deadly.
Excellent and successful traders ultimately hate risk. Leeks don’t know this. Just as leeks are mistaken about the awkward explanations that they face, the are completely mistaken in how they explain successful people. They think that outstanding, successful people became successful by taking risks. Their understanding is linear and simplistic:
- The market has risk;
- Therefore, if you want to succeed you must take risks;
- Conversely, if you don’t take risks you cannot succeed…
Wrong! Bluntly wrong!
If you want to escape “the fate of leeks”, a concept you must learn is:
- Don’t take on risk if you can avoid it…
- Even if there is a time when risks must be taken, then let the fools take risks while you observe from the sidelines and gain experience.
The most direct way to gain experience is through your own experience in practice. But when it comes to risk, you must learn as early as possible to observe others taking risks, not through your own experience.
I had colleague at New Oriental who went to Oxford’s Saïd Business school to get an MBA. After he returned, he told me that in the first class the professor wrote these words on the blackboard:
Use other people’s money!
Note: this sentence comes from the name of a famous book that was published in 1914: Other People’s Money, and How the Bankers Use It. The author was Louis Dembitz Brandeis, and thanks to the internet you can read the book here: https://archive.org/details/otherpeoplesmone00bran.
This is a deep and wise admonition. Remember the “long-term, stable, low-cost cash flow” mentioned in the last chapter. So, what graduates from that famous business school begin to cultivate from the first moment is “the ability to raise funds”. It’s just that, to avoid people misunderstanding, they also learn a bit of “hypocrisy” to protect themselves and don’t mention it. Isn’t the animal world like this? All animals have some secret methods to protect and hide themselves.
If I had the chance to open a world-famous business school, I would definitely put this sentence on the walls and make students remember it for the rest of their lives:
Watch other people taking risks!
This is more important than “Use other people’s money.” Why? Today, with the global economy having developed rapidly for several decades, it’s no longer that hard to “have a bit of money”, and there are more and bigger opportunities than in the past, so you’re able to do quite a lot of things “using your own money”, and “using other people’s money” is relatively risky…
But no matter how the economy develops, risk is still risk, and there always must be people to take risks to gain experience… but the person taking the risks doesn’t have to be you. So what do you do? You observe, you summarize, you learn. The bigger the risk is, the more people like you are needed. Actually, the person who takes the risk will ultimately thank you. Why? Sure, they lost money, but because of people like you summarizing their experience, not only did you benefit, but you shared the experience, giving their failure a new meaning.
It’s very hard to think of the correct conclusion, because sometimes the “correct conclusion” looks so evil, even if at its deepest point it is a bright light.
There are some other things that are not even “taking risk”, because with risk there’s always a chance for survival. For instance, borrowing money to enter the trading market, or adding leverage, or playing with futures without professional knowledge… These aren’t “taking a risk”, these are simply “courting death”. In the blockchain trading market, this is even more the case. It’s already a hugely volatile (risky) target, so if you add even more risk, isn’t that courting death?
However, leeks don’t believe this; they refuse to believe it. Even if they’ve already died a violent death, they still believe that “if someone were willing to lend me a little more money… Ha! I could definitely make it all back!”
Note
99% of the time, the content of this chapter will be misunderstood. The ambiguity arises from the phrase “other people”, and it’s usually those who have failed at investing or speculating who “step right up” and misunderstand it. They don’t understand that the “use” in “use other people’s money” refers to “legally using” in the field of finance, protected by relevant laws and regulations. Similarly, the “watch” in “watch other people take risks” obviously doesn’t refer to “watching with ill will”, but instead refers to rationally observing and learning.
There is some risk in writing this, because before it has been completely explained it is easily misinterpreted as being “politically incorrect… So basically, once I’ve written it I will be condemned, and condemned from every corner.