Always treats mistakes as learning experiences.
We're programmed to learn from our mistakes. But what we learn depends on our reaction.
A child goes to school, and what does he learn about mistakes there? In too many schools, he is punished for making mistakes. So he learns that making mistakes is WRONG; and that if you make mistakes you're a FAILURE.
Having graduated with this carefully ingrained attitude, what's his reaction when, as is inevitable in the real world, he makes a mistake? Denial and evasion. Blame his investment advisor for recommending the stock, or the market for going down. Or justify his action: "I followed the rules - it wasn't my fault!" just like the kid who screams "You made me do it." The last thing he's going to do with that kind of education is to be dispassionate about his mistake and learn from it. So, just as inevitably, he'll do it again.
When a master investor makes a mistake, his reaction is very different. First, of course, he accepts his mistake and takes immediate action to neutralize its effect. He can do this because he takes complete responsibility for his actions - and their consequences.
Buffett has no emotional hang-up about admitting his mistakes. He makes it his policy to be frank and open about them. According to Buffett, "The CEO who misleads others in public may eventually mislead himself in private." To Buffett, admitting your mistakes is essential if you are to be honest with yourself.
There is no shame in being wrong, only in falling to correct our mistakes. Having cleared the decks by getting rid of the offending investment, a master investor is free to analyze what went wrong. And he always analyzes every mistake.
- First, he doesn't want to repeat it, so he has to know what went wrong and why.
- Second, he knows that by making fewer errors he will strengthen his system and improve his performance.
- Third, he knows that reality is the best teacher, and mistakes are its most rewarding lessons.
If you wanted to teach someone how to ride a bike, would you give him a book to read? Or would you give him a few pointers, sit him on a bike, give him a gentle shove and let him keep falling off until he figures it out for himself?
"Can you really explain to a fish what it's like to walk on land?" Buffett asks, "One day on land is worth a thousand years of talking about it."
We're programmed to learn from our mistakes. But what we learn depends on our reaction.
A child goes to school, and what does he learn about mistakes there? In too many schools, he is punished for making mistakes. So he learns that making mistakes is WRONG; and that if you make mistakes you're a FAILURE.
Having graduated with this carefully ingrained attitude, what's his reaction when, as is inevitable in the real world, he makes a mistake? Denial and evasion. Blame his investment advisor for recommending the stock, or the market for going down. Or justify his action: "I followed the rules - it wasn't my fault!" just like the kid who screams "You made me do it." The last thing he's going to do with that kind of education is to be dispassionate about his mistake and learn from it. So, just as inevitably, he'll do it again.
When a master investor makes a mistake, his reaction is very different. First, of course, he accepts his mistake and takes immediate action to neutralize its effect. He can do this because he takes complete responsibility for his actions - and their consequences.
Buffett has no emotional hang-up about admitting his mistakes. He makes it his policy to be frank and open about them. According to Buffett, "The CEO who misleads others in public may eventually mislead himself in private." To Buffett, admitting your mistakes is essential if you are to be honest with yourself.
There is no shame in being wrong, only in falling to correct our mistakes. Having cleared the decks by getting rid of the offending investment, a master investor is free to analyze what went wrong. And he always analyzes every mistake.
- First, he doesn't want to repeat it, so he has to know what went wrong and why.
- Second, he knows that by making fewer errors he will strengthen his system and improve his performance.
- Third, he knows that reality is the best teacher, and mistakes are its most rewarding lessons.
If you wanted to teach someone how to ride a bike, would you give him a book to read? Or would you give him a few pointers, sit him on a bike, give him a gentle shove and let him keep falling off until he figures it out for himself?
"Can you really explain to a fish what it's like to walk on land?" Buffett asks, "One day on land is worth a thousand years of talking about it."
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