The tension isn't between right and wrong—it's between two forms of discipline that both work, just for different nervous systems.
Victor's "great track records sidestep ruin" vs. your "I fear selling a compounding machine to avoid feeling foolish"—both expensive mistakes. The question is which one you can live with.
The dosage metaphor nails it. Some people can metabolize -40% volatility. Others can't. Pretending otherwise doesn't make you disciplined—it makes you a liability to your own process.
One thought: How do you know when you're being principled vs. dogmatic? Victor could miss a decade waiting for perfect re-entry. You could ride something down that genuinely broke.
But maybe that's the point. There's no universal answer. Just the one that lets you stay in the game and recognize yourself in ten years.
Buying a stock always comes with a trade-off: you give up the option of holding cash and deploying it elsewhere. It’s binary. One or the other. You can’t have both.
If that’s true, here’s the uncomfortable question: if you wouldn’t buy an overvalued stock today because the risk-adjusted returns don’t stack up, how can you justify holding a stock you bought cheap that’s now expensive? The choice - cash or stock - hasn’t changed. Yet the answer often does, depending on whether you already own it.
That inconsistency has a name. Behavioral economists call it the “endowment effect.”
For a time I tried to fight it, forcing myself to apply the same decision framework whether I already owned the stock or not. But I learned that’s not the right solution either.
Why?
Because investing isn’t just about clean theory. The math of compounding, the drag of taxes and other frictional transaction costs all conspire to change the calculus.
The great investor Phil Fisher learned the hard way in relation to an investment in Motorola that if you are in the right companies, the potential rise can be so enormous that everything else is secondary.
This writing is great. You fleshed out the contrast and made it enjoyable.
Thank you Kyith 🙏🏻
This landed.
The tension isn't between right and wrong—it's between two forms of discipline that both work, just for different nervous systems.
Victor's "great track records sidestep ruin" vs. your "I fear selling a compounding machine to avoid feeling foolish"—both expensive mistakes. The question is which one you can live with.
The dosage metaphor nails it. Some people can metabolize -40% volatility. Others can't. Pretending otherwise doesn't make you disciplined—it makes you a liability to your own process.
One thought: How do you know when you're being principled vs. dogmatic? Victor could miss a decade waiting for perfect re-entry. You could ride something down that genuinely broke.
But maybe that's the point. There's no universal answer. Just the one that lets you stay in the game and recognize yourself in ten years.
Format worked. Worth the experiment.
Thanks, Phaetrix. This was another thought-provoking response. I agree with your conclusion.
Buying a stock always comes with a trade-off: you give up the option of holding cash and deploying it elsewhere. It’s binary. One or the other. You can’t have both.
If that’s true, here’s the uncomfortable question: if you wouldn’t buy an overvalued stock today because the risk-adjusted returns don’t stack up, how can you justify holding a stock you bought cheap that’s now expensive? The choice - cash or stock - hasn’t changed. Yet the answer often does, depending on whether you already own it.
That inconsistency has a name. Behavioral economists call it the “endowment effect.”
For a time I tried to fight it, forcing myself to apply the same decision framework whether I already owned the stock or not. But I learned that’s not the right solution either.
Why?
Because investing isn’t just about clean theory. The math of compounding, the drag of taxes and other frictional transaction costs all conspire to change the calculus.
The great investor Phil Fisher learned the hard way in relation to an investment in Motorola that if you are in the right companies, the potential rise can be so enormous that everything else is secondary.
So what is the right approach?
I break it all down, including the math and the Phil Fisher story in this post for anyone interested: https://rockandturner.substack.com/p/investing-subconscious-myopia