Tag Archives: Decision Making

Take Control of Your Life

“Until one is committed, there is hesitancy, the chance to draw back, always ineffectiveness.

Concerning all acts of initiative (and creation), there is one elementary truth, the ignorance of which kills countless ideas and splendid plans: that the moment one definitely commits oneself, then Providence moves too.

All sorts of things occur to help one that would never otherwise have occurred.

A whole stream of events issues from the decision, raising in one’s favor all manner of unforeseen incidents and meetings and material assistance, which no man could have dreamt would have come his way.

I learned a deep respect for one of Goethe’s couplets:

“Whatever you can do or dream you can, begin it.

“Boldness has genius, power and magic in it!”

The Scottish Himalayan Expedition (1951) by William Hutchison Murray

If you want to make the most of your life, you have to be decisive. The opposite of decisiveness is not carefulness. It is hesitancy. If you dwell in doubt, you’ll never know what you want or what you need to do.

Hesitancy sucks your time and energy, your most important assets. Instead of using them to get things done, you’ll be wasting them.

Hesitancy is inefficiency. It sucks the life out of you. It kills you slowly.

Hesitancy Is Counter-Productive

Overanalyzing, overthinking, and being too cautious are all manifestations of hesitancy. They are counter-productive.

If you’re hesitant, you’ll never make any progress in your life. You’ll never accomplish anything significant. You’ll go with the flow and end up where life takes you. It might not be the place you want to be.

The alternative is to make firm decisions. To take your life into your own hands. Being crystal clear about what your intentions are, long term and short term. Knowing exactly what you want at every moment in your life and going after it.

Being Decisive Is Scary

Your decisions will have consequences, and you’ll have to deal with them. You can’t come up with excuses anymore. You can’t play the blame game. You can’t be the victim and beg for sympathy.

You’ll be vulnerable to failure. If you fail, there’s no one to blame but yourself. It requires a lot of courage. It might be out of your comfort zone. It might require willpower to follow up. You might risk public humiliation.

Are you ready to face all the consequences and to deal with them?

Flex Your Decision Muscle

Decisiveness is a mental muscle like courage and willpower. The more you use it, the stronger it gets. Like any muscle, start exercising it with appropriate weights.

Start with your everyday life. Can’t you decide whether to wear casual or formal? Don’t you know if you want to go to a cinema or a cafe? Can’t you choose between Asian and Italian for dinner?

Make a decision right then and there. If you don’t know, toss a coin. Then move on to heavier weights and flex your mental muscles on harder decisions.

If a decision is really hard, that means there isn’t much difference in both options. In that case, just toss a coin to decide on one option and follow up on that decision. That is way more productive than wallowing in hesitancy.

Be Decisive at Work

Sometimes, we have several tasks at work and don’t know which one to start with. We start with one, dabble on it a little, and move on to the next one. We switch back and forth between tasks without actually completing any one of them. That’s an excellent opportunity to flex our decision muscles.

Just pick one of the tasks and do not move on to another task before completing it. This can be painful if you don’t know how to tackle it but stay with it. When you do that, the solutions appear right in front of you, and you find a way to get it done.

Be Decisive in Life

“It would be nice if I lost some weight.” Convert that into a firm decision. “I am going to lose 50 pounds within a year.”

“It would be nice if I made more money.” That becomes “I am going to increase my income by 20% within a year.”

Set goals and make them crystal clear, so that when the deadline arrives, there’s no doubt whether you’ve achieved them or not.

Don’t worry if your decision muscle is weak now. Start with small decisions and work your way up to harder ones.

If you lack motivation, think about what’s worse. Making a firm decision, failing, and growing as a result or wallowing in hesitancy, waking up in your deathbed one day, and realizing that you’ve wasted your life?

An Analytical Way to Making Decisions and Solving Problems

“We cannot solve our problems with the same kind of thinking we used when we created them.”

That’s a quote attributed to Einstein and the idea behind today’s post. Today, I’ll discuss how to get to the higher level of thinking with which we can solve our problems.

Let me explain the low-level and high-level thinking on an example. This example might sound simple to you but bear with me. You can use the same approach successfully on more complex problems in your professional and private life.

A Sample Problem: Multiple File Hosting Services

At the moment, I use three different file hosting services, iCloud, OneDrive, and Google Drive. They came with my iPhone, MS Office, and Google account.

As a result, my files are scattered around in three different services. They’re also installed on my laptop, which makes it slower to boot.

That’s a problem, and I decided to solve that problem. Now, there are two approaches to solving that problem.

The Default Approach to Solving Problems

The default approach is to randomly choose one of the services, start moving files to that service in a haphazard manner, and start deleting files and software from my laptop and smartphone.

Can you see the problem with that?

With that approach, I can easily choose the wrong service, lose some important files, and end up with an incorrect configuration on my laptop or smartphone.

That might sound obvious to you, but more often than not, we follow that casual approach in solving problems, not only in trivial matters but also in critical professional endeavors. As a result, we create greater problems than we intend to solve.

“Today’s problems come from yesterday’s solutions.” Peter Senge

The Higher Level Thinking Approach to Solving Problems

In this approach, we go one level higher in our thinking. Instead of working on the problem directly, we work on the problem of solving the problem at hand.

The first step is to come up with the answer to the following question: “What’s the best way of solving this problem?” In my case, the answer is as follows.

  • Decide on a file hosting service.
  • Move the files to that hosting service.
  • Remove the duplicate files from my laptop, smartphone, and tablet.
  • Remove the unnecessary software from my laptop, smartphone, and tablet.

Now, that gives us a high-level breakdown of the solution. That’s one step toward the ideal solution, but still imperfect. Can you see why?

These four steps are too high-level to be executed directly. We need to break them down further.

Making the Right Decisions

The first step above is a decision. That might look like a simple decision to you, but I want to apply the same problem-solving technique in this step to demonstrate its use in decision making.

There are two ways to make a decision, instinctively vs. analytically. In the first approach, we make a decision without thinking, with our instincts, emotions, and intuitions.

If you developed your intuition in a field over the years, deciding on autopilot might be efficient for you, but most of the time, we don’t make the best decisions with this approach.

In his book Thinking Fast and Slow, Nobel Laurate behavioral economist Daniel Kahneman explains how our biases misguide our decision making when we operate on autopilot mode.

An Analytical Approach to Making Decisions

With the analytical approach, our goal is to overcome our biases and to make an informed decision. Here are the steps of the analytical approach.

  • Decide on a set of decision criteria.
  • Determine your options.
  • Analyze your options according to your decision criteria.
  • Choose the option that satisfies your criteria the most.

In my case, my decision criteria are the following.

  • 100 GB disk space
  • Price
  • Works on Windows and iOS
  • Preferably, a service that I’m already using
  • Preferably, a company that I haven’t paid yet

My options are the following.

  • iCloud
  • OneDrive
  • Google Drive
  • Dropbox

The option that satisfies all of my decision criteria is Google Drive. I don’t like the fact that I paid hundreds of euros to Apple and Microsoft and still have to pay them an extra for anything more than 5 GB disk space.

I don’t need the 1 TB disk space of Dropbox. Therefore, I don’t want to pay an extra 80 euro each year for a service I won’t use.

Google is probably using my files to collect data about me to show me personalized ads, but I’m fine with that. So, my final decision is Google Drive.

Break Down Solution Steps into Action Items

I need to break down the remaining three steps before I start to execute them.

Move the files to Google Drive.

  • Move the files in OneDrive to Google Drive. This is a cut and paste operation on my laptop.
  • Backup the photo and video files in my iPhone to Google Drive.
  • Make sure there aren’t any photo and video files in my iCloud that aren’t backed up to Google Drive.

Remove the duplicate files from my laptop, smartphone, and tablet.

  • Remove the photo and video files from my iCloud.
  • Remove the photo and video files from my iPad.

Remove the unnecessary software from my laptop, smartphone, and tablet.

  • Remove iCloud from my laptop.
  • Remove OneDrive from my laptop.
  • Stop backing up my photo and video files to iCloud.
  • Set up my iPhone to back up my photo and video files to Google Drive.

When to Use the Default Approach

In some cases, writing down the solution steps might feel like too much work to you. You might be tempted to skip it and attack the problem at hand right away. Sometimes, you might save some time with the default approach when solving trivial problems.

More often than not, we underestimate the challenges we face. We attack the problem head first. As a result, we either end up in a dead end or create a problem that’s greater than the one we tried to solve.

In most cases, except the trivial ones, it pays off to write down a general overview of how we’re going to solve the problem hand. In more complicated cases, we can treat each step as a problem in itself and break it down into further steps.

You can go into as much detail as you want until you reach clear action steps. Don’t worry about wasting time planning, because as Brian Tracy says “every minute you spend in planning saves 10 minutes in execution.” That’s an approximation of course, but it gives you a good idea.


Our default reaction to problems and decisions is to dive head first into them. That results in greater problems in the future.

We can improve our decision making by coming up with decision criteria, determining our options, analyzing our options according to the decision criteria, and choosing the option that satisfies our criteria the most.

We can solve our problems effectively by writing down the solution steps and breaking down each step until we come up with clear action items.

The analytical way of making decisions and solving problems seems to be a lot of work, but it prevents us from greater problems in the future.

How to Optimize Your Decision Making Process

Making a decision is one of the most exhausting mental processes. Making a series of decisions drains your brain and as a result, the quality of your decisions plummet. This phenomenon is called decision fatigue.

A successful life requires a lot of quality decision making, but we have a limited capacity for decision making. That is a problem and that problem can be solved by optimizing our decision making process. I will discuss several methods to optimize our decision making process. If you have other methods or ideas, please let me know in the comments.

No decision is (most of the time) the worst decision.

Decisiveness is a personality trait of successful people. Successful people make a decision, act on it, and then deal with the results.

  • Make a decision,
  • Act on it,
  • And deal with the results.

You might think that the opposite of that sequence would be

  • Don’t make a decision,
  • Stay put,
  • And don’t deal with the results.

That second sequence might look more attractive to you, because you don’t need to make the mental effort to make a decision. You don’t need to make the physical effort to take action. And most important, you don’t need to deal with the results. This is an illusion.

While you’re staying put, the world is moving in all kinds of directions. Time is passing. Your time on this earth is limited. That means, not making a decision is a decision itself. It has its results and you have to deal with those results.

In some rare cases, not making a decision can be the better decision. The so called “wait-and-see” approach might be the superior approach in some chaotic situations, but most of the time, it’s the worst decision.

Think about choosing between two job offers for example. If you hesitate between two offers for too long, you’ll end up losing both offers as they might be filled with other candidates. If you hesitate between two vacation options for too long, you will end up spending your vacation at home.

I have hundreds of ideas in my notebooks. I pick one every day and write a blog post about it. If I hesitate too long between different ideas, I might end up with no blog post on that day.

In summary, making no decision is a decision and it is most of the time the worse decision. If you can’t make a decision, write down your options, eliminate the less desirable ones, and choose one of the remaining ones randomly. You can find more about that in my post called From Hesitant to Decision Maker in Four Simple Steps.

Automate Your Decisions

You might have heard about Mark Zuckerberg, Steve Jobs, and Albert Einstein wearing the same clothes every day. The reason they are doing that is to eliminate one more decision from their daily routine. Remember every decision you make takes away from your limited capacity to make decisions in the rest of the day.

You can automate some simple decisions such as what you’re going to wear and what you’re going to eat. I don’t wear the same shirt every day, but my shirt choosing process is fairly simple. Just wear the left most shirt in the wardrobe.

You can automate your day further by establishing a daily routine. I have a daily routine where all the activities such as eating, writing, working out are fixed in time and duration. I don’t a have a strict schedule, but I more or less know when I’m going to start that activity, what I’m going to do during that activity, and how long it’s going to take.

Having a daily routine is especially useful at work. You can allocate different chunks of your time to different activities and repeat the same routine every day. That way you never have to think about what you’re going to do next.

Another area I use automated decision making is saving and investing. I have a fixed amount that I save every month and invest that in an index fund and bitcoin. This automated saving and investing system eliminates all the emotions from the investing process and prevents me from making those costly investment mistakes.

Not having to think about what to do next saves a lot of decision making capacity, which you can use in other, more important decisions throughout the day.

The Downside of Automating Your Decisions

The downside of having a daily routine is creating a comfort zone around it and never improving it. Even though it saves considerable mental energy to have a fixed daily routine, you might want to adjust it according to the changing conditions in your life.

You might want to update your processes from time to time. Being too strict results in guaranteed failure and innovation must be a part of your job, business, and life. Daily evaluations are a part of my daily journaling practice and they help me make the necessary course corrections.

How to Increase Your Decision Making Capacity

Using your decision making capacity efficiently is a critical part of optimizing your decision making. Another critical part of that is to increase your decision making capacity.

Decision making is a muscle. You can increase your decision making capacity by training your decision making muscles. Just make a list of decisions to be made and commit to make at least one of those decisions every day.

Remember, not making a decision is most of the time the worst decision. If you can’t decide between two or more options, they are equally good or bad. It’s more important to deal with the consequences of a decision than to make the decision. Just toss a coin if you have to, which is much better than not deciding at all.


Decision making is a muscle and there can be a lot of thoughts, emotions, and distractions weighing in on that muscle. You can make your best decisions when you have mental clarity. You can achieve mental clarity by letting go of your useless thoughts, emotions, and distractions.

North Star, Values, and Clear Goals

Having a north star, an ideal, a well-defined life goal that you are striving towards can make your decision making process extremely easy. Having clear goals and values can guide your decision making process.

When you have more than one option when making a decision, just evaluate each option for how they serve your north star, your values, and your goals. Once you do this exercise and you’re honest with yourself, the choice will be obvious.

It’s one thing that the right choice is obvious and it’s another thing to actually make that decision and follow up on it with your actions. If you’re struggling with that, you might want to work on your self-discipline and courage.


The quality and quantity of your decisions are a critical factor in your success in your life. You can optimize your decision making process with the following methods.

  • Know that no decision is (most of the time) the worst decision and make a random decision if you can’t make your mind.
  • Automate your decisions by creating daily routines. Don’t forget to update your daily routine as needed to avoid stagnation.
  • Increase your decision making capacity by using and training your decision making muscle.
  • Increasing your mental clarity with mindfulness.
  • Have a north star. Have a clear set of values and goals to guide your decisions.

Disclosure and Disclaimer

I owned some SPY and BTC at the moment of writing this post. This post is for information purposes only and not intended to be investment advice.

Bias for Action

Act on an idea even if you aren’t sure you’ll succeed, if it promises secondary benefits such as new ideas, connections, experience, and more courage and self-discipline.

Doing nothing is more valuable than distraction and busy work. Activities that have no value not only waste your time, they also waste your attention and mental energy. Attention and mental energy are even more scarce than time. Once they are spent, it takes time to recuperate them.

Doing nothing is better than distraction and busy work, because at least, it doesn’t waste our attention and mental energy. Moreover, doing nothing allows our minds to process and organize all the information we have consumed.

Doing nothing allows our minds to process and organize all the information we have consumed.

Distraction and busy work are low value activities. They produce little or no value per unit time and energy. If you are used to distraction and busy work, you might have a difficult time to come up with valuable activities. In that case, it makes sense to take a break and reflect on your long term goals.

What would be the most valuable action to take right now with respect to your long term goals?

In other words:

Which action could you take right now that would move you the most towards your long term goals?

If you can’t come up with a precise answer, come up with a dozen of ideas. Write all of them down. If you aren’t sure about any of those ideas, pick the one that would make the most difference. Act on that idea even if you aren’t sure it would work.

The idea either works and you make significant progress towards your goals or it doesn’t and you eliminate an idea from your list, which makes your decision easier next time. However, there’s more to it.

Cherry on Top

When you act on an idea and you fail, you gain experience. If it involves other people, you extend your network. If it’s a public activity, you increase your profile. Moreover, you expose yourself to new opportunities. You might come across new ideas. People you reach out to can give you a new direction.

It’s always a good idea to take action even if you aren’t sure that it will produce the results you’re aiming for. There’s a catch though. The activity shouldn’t be a distraction, which is an activity that doesn’t produce any value at all. The activity shouldn’t also be busy work, an activity that produces only marginal value and that is something you are already familiar with, which doesn’t improve your skills.

Criteria to Consider

When you’re choosing an idea from your list, think about the cherry on top.

  • Would this idea produce any value even if it fails its main objective?
  • Would it lead to new ideas?
  • New connections?
  • New Skills?
  • More courage?
  • More self-discipline?
  • New experiences?
  • Higher public profile?

If you answer one or more of these questions positively, then go ahead and do it anyway, even if you know it will likely fail. This is called bias for action and it’s much better than distraction, busy work, and doing nothing.


Doing nothing is better than distraction and busy work. Acting on selected ideas is even better than doing nothing. The criteria here is the cherry on top, the secondary benefits even if the main benefit fails to materialize.

Miserable or Peaceful, All by Your Assumptions

Your assumptions can make you feel miserable. Your assumptions can also make you feel peaceful. The difference is how well your assumptions match the reality.

Loss Aversion

Here’s an example. One of our biases as humans is loss aversion. $100 lost hurts more than $100 won makes us happy. That bias is ingrained in our psychology over billions of years of evolution. Like all the other biases and logical fallacies, the best way to handle it is to become aware of it and to consciously work on it to let it go.

Loss aversion is an assumption that is guaranteed to make us miserable over time. It is also guaranteed to make us lose money over time. Loss aversion makes us avoid investing because of the inherent risk. However, we know that savings in fiat currency such as USD and euro will lose some of their value over time. Loss aversion actually makes us lose a portion of our savings.

Perfect Trader

Another assumption that makes us feel miserable is that a good investor must know which asset will appreciate the most, when, and how much. When we make that assumption we try to find that asset, we try to time the market, and we start trading. As we know, human psychology is our worst enemy when trading and as a result, we lose money.

More Realistic Assumptions

How can we replace the loss aversion bias and the perfect trader assumption?

We can do that by replacing them with other assumptions.

  1. Savings in fiat currency such as USD and euro will lose some of their value over time.
  2. No one can find the asset that will appreciate the most, when, and how much.

When you make the two assumptions above, your investment decisions become trivial. All you have to do is to build a strategy on top of them.

  1. Invest savings in cash to a diversified portfolio, such as S&P 500 index funds, over time using dollar cost averaging.
  2. Don’t sell unless you need the money.

Possible Outcomes

By investing the cash, the savings are prevented from losing their value over time due to inflation. That satisfies the first assumption. Holding a diversified portfolio satisfies the second assumption. We don’t try to find the asset that would appreciate the most. Dollar cost averaging also satisfies the second assumption, because we don’t try to time the market.

By not selling unless we need the money, we avoid trading, because the more we trade, the more we lose. S&P500 index funds are already diversified, but a portfolio can be further diversified using other assets.

Like all realistic scenarios, the scenario above also has its risks. The main risk is the market crashing after you have invested the maximum amount. This is a realistic scenario. But the history has shown us that the markets have recovered after crashes and reached new highs. That’s why we have the last part, don’t sell unless you need money.

If you accept the fact that losing money is inherent in having savings in every scenario, loss aversion loses its meaning, because there is always a risk of losing money, no matter what you do. You can’t do anything about it. It’s outside of your control. Once you accept that fact, you stop feeling miserable about it and you have peace of mind.

Your Turn

Do you feel miserable in a certain area of your life?

Whenever you feel bad in a certain area of your life, ask yourself the following question.

  1. Which assumption do I make that makes me feel miserable?
  2. Does this assumption match the reality?
  3. Which assumption can I adopt that matches the reality more?

Once you accept the reality completely, align your assumptions with it, and act on those assumptions, you will stop feeling miserable, and have peace of mind.


This post is for information purposes only and not intended to be investment advice.

Cherry on Top

Cherry on top is a concept discussed in the book Business Brilliant by Lewis Schiff. Cherry on top refers to the benefits you receive even if a project fails.

If you can’t decide whether to start a project or not, make a list of all the benefits even if the project details. Here are some examples:

  • Know how
  • Experience
  • Extended network
  • One less item to consider when starting a new project
  • The potential to come across to a more promising project while working on this project

My Cherry on Top

I have been publishing a blog post per day for the last 50 days. My success metric for this blog is the number of email newsletter subscribers. At the beginning of the 50 days, that was the only benefit I could see. After 50 days, I see more benefits.

Mental Clarity

I come across a lot of interesting ideas. I also come up with some interesting ideas. These are the lessons I have learned from books, audiobooks, and other resources as well as from my own experience. Some of these ideas seem to be contradicting with each other.

The best way to find out which ideas are more rational and realistic is to write them down and to reflect on them. That way I can weed out the contradicting ones and stick to the ones that match the reality the most.

Learning My Life Lessons

It’s really easy to install software to a computer. It’s not the same with our minds. It takes a lot of repetitions to learn a lesson. If I don’t write down an interesting idea, it will be gone for sure.

The best way to learn the life lessons on an unconscious competence level is to write them down and read them over and over until I can act on them on an unconscious competence level.


I don’t need to publish a blog post a day to achieve mental clarity and to learn my life lessons. I could do that by journaling them. However, publishing a blog post per day gives me accountability. I did it through very busy days, including traveling overseas, as well as in holidays, when I felt like doing nothing productive at all. Would I journal on those busy or lazy days? Probably, not. That is another life lesson there.

Public accountability increases self-discipline.

Coming Up with New Ideas

As I’m writing down and reflecting on existing ideas, I come up with new ideas. Ideas breed ideas. Projects breed projects and the cycle continues. Better opportunities show up only when you use the opportunity that is in front of you. And as trivial as it may seem, publishing your ideas on a blog is an opportunity you must use.

Better opportunities show up only when you use the opportunity that is in front of you.


I don’t claim to be the smartest, most rational man on earth. By putting my ideas out there, I welcome comments. That might not always be positive. If someone comes up with a rational counterargument that is more realistic than mine, I’m happy to accept it. That’s how I make progress. So, your feedback and comments on my posts are always welcome.


Publishing a blog post per day has several benefits for me, such as mental clarity, learning my lessons, and receiving feedback. I invite you to start your public blog as well to reap those benefits. Moreover, whenever you doubt whether to start a new project or not, think about the benefits you will receive even if the project fails.

I’m Irrational

So are you. So are we all humans. Next time you think someone is acting irrational, remind yourself that we are all irrational by default. It takes effort to overcome our biases and logical fallacies to become rational.

Sometimes, being irrational gives us an advantage. Sometimes, it results in us shooting ourselves in the foot. In either case, it pays off to be conscious about our being irrational and correcting ourselves whenever possible.

How Do We Recognize When We Are Irrational?

We can use the four levels of learning model to improve our rationality. The first step is go from the level of unconscious incompetence to conscious incompetence. We do that by learning what we don’t know we don’t know. Books such as Thinking Fast and Slow by Daniel Kahneman and Influence by Robert Cialdini are great places to start.

We are irrational by default.

Sometimes, it’s enough to learn about a bias or fallacy to recognize it in us and to not act on it. In other cases, it requires more effort and awareness. In either case, the first step to becoming more rational is to accept that we are irrational by default.

We are irrational by default, because it had its evolutionary advantages. Being rational requires thinking through things. It takes time and effort. You don’t have that kind of time when you are confronted with a wild animal in savannah. In such cases, we default to simple biases and heuristics, simple rules of thumb, such as “see animal bigger than me, run away.”

Learn About Biases and Fallacies

We all carry most of our biases and heuristics that our ancestors developed over billions of years. We are not even aware of most of them. As a result, we act on them unconsciously. This is the unconscious incompetence level. It takes conscious effort to learn about these biases and heuristics, recognize them in ourselves, and then let them go, not act on them.

When I was a toddler, I was afraid of cats. I had no reason to be afraid of cats. I wasn’t attacked by a cat. Just the mere sight of an animal made me afraid. When I shared my fear with my parents, they explained me that there was nothing to be afraid of a cat. I overcame that fear easily.

Acknowledging our own irrationality is the first step to overcome it.

As I learn more about biases, I started to recognize them in myself. As soon as I recognize a bias in myself, I moved from unconscious incompetence to conscious incompetence. I was conscious that I was incompetent.

I became aware of a confirmation bias the other day. I sold my Ripple before it started its tenfold increase. I sold it, because its use case, being an interbank currency, would make it a stable currency. Obviously, this conclusion was incorrect and the market showed it.

My Confirmation Bias

The other day, I caught myself reading an article with the hope that the author agreed with my initial conclusion about Ripple. I had a conclusion. I acted on it. The market proved me wrong. And I still kept hanging on my conclusion and looked for evidence that confirms my conclusion. This is called confirmation bias. And yes, it is one of the many biases and heuristics that makes me irrational.

As soon as I recognize that I have confirmation bias, I move from the level of unconscious incompetence to conscious incompetence. The next level is conscious competence. That is consciously letting go of my confirmation bias on this issue. It takes time and effort to do that.

Acknowledge, Learn the Lessons, and Let Go

I recognize that my initial conclusion was incorrect. The markets have shown me that. The idea here is to learn a lesson about this experience. The lesson is that the markets can move against my opinions. It doesn’t make any sense to stick to my opinions until the bitter end.

As I remind myself the lesson I learned over and over, I move from the conscious competence level to unconscious competence. It becomes my default state. I’m comfortable with it. It doesn’t take any effort to get into that mental state anymore. In this case, I completes the circle of four levels of learning.

Call to Action

We all have our set of biases and logical fallacies. What are the ones that you recognized in yourself lately? How are you going to let go of them?


This post is for information purposes only and not intended to be investment advice.

Technical Analysis of Stock Prices is Useless

Holidays have been just over and I had some great time with family and friends. I met an old friend in my hometown and most of our conversation was focused on cryptocurrencies. At a certain moment, my friend started to explain his technical analysis on Bitcoin and Bitcoin Cash.

My old friend told me to switch from Bitcoin to Bitcoin Cash, if the price of a Bitcoin retraces from $16K to $8K, because he expected Bitcoin Cash to increase fourfold in that case. He started to explain his theory, but I couldn’t listen to him. His hypothesis that 50% retracement in Bitcoin triggering a 400% increase in Bitcoin Cash sounded farfetched to me.

I could easily discard my friend’s theory, if he didn’t told me to invest in XRP before it increased tenfold.

He is also a successful visual artist and he spends a lot of time looking at live price charts, as trading happens. So, I suspect that he might see some patterns in there. But I’m not 100% sure that the patterns he sees predict the future with statistical significance.

In order to believe in my friend’s technical analysis, I need to do some statistical analysis on his trade results. Until then, technical analysis will be something like fortune telling to me. It might be fun, but not rational or realistic.

Looking at price charts and trying to predict their future reminds me of fortune tellers that look at the remainders of a cup of coffee that you have just drank and tell you what’s going to happen in your future.

What If It Worked?

Let’s assume that technical analysis accurately predicted the price moves in the future. That would create a huge incentive to develop automated trading systems around them. Once those systems got deployed in the field, they would make the signals of technical analysis useless.

Automated trading systems would create instant price gaps as soon as a technical analysis signal got triggered. This is the same effect as how public news move prices. If you think about it, price moves are actually public news. You can’t make any more money from technical analysis than from public news.

Why Do We Buy Into Technical Analysis?

There are several biases and fallacies in play when it comes to technical analysis. One of them is our tendency to see patterns in random data. We intuitively assume that we live in a well-ordered universe and everything has a reason. In reality, we live in a universe where chaos and randomness play a huge role.

Another bias that makes us believe in technical analysis is the optimism bias. What if it was true? We could make a lot of money just by clicking a few buttons. Wouldn’t it be great? Unfortunately, it doesn’t work like that. You can read more about these and other biases and fallacies in the book Thinking Fast and Slow by Daniel Kahneman.


If you want to preserve and increase your savings, it’s important to base your investment decisions on sound assumptions. Technical analysis is not a sound assumption. If you want to read about which assumptions are sound and which are not, then you can read my previous post.


This post is published for information purposes only and not meant to be investment advice.

7 Irrational Investment Beliefs and Their Alternatives

Most of the beginner investors have intuitive assumptions that don’t match the reality of the markets. These intuitive assumptions are part of human nature. We need to let go of these assumptions to improve our results as investors.

1. A good investor must know which asset is going to appreciate or depreciate the most.

It’s impossible to know which asset is going to appreciate or depreciate the most. Therefore, it doesn’t make sense to invest all of our savings into a single asset. Holding a diversified portfolio is the best strategy for the retail investor like you and me.

The only exception to that rule are the fiat currencies such as USD and Euro. We know that they will depreciate over time, because it’s the official policy of central banks and governments.

2. A good investor must know the top and bottom of an asset.

It’s impossible to know the top and bottom of an asset. The price of an asset can go lower even if you think it is already too low. In other words, “don’t try to catch a falling knife.” The price of an asset can go higher even if you think it is already too high. Rules such as “never buy at a historic high” don’t reflect the nature of stock exchanges. Buying at historic highs worked well in many cases.

3. A good investor must make a lot of profitable trades.

It’s impossible to know which assets are going to appreciate or depreciate. It’s impossible to know how much an asset is going to appreciate or depreciate. As a result, the more we trade, the more mistakes we are going to make, and the more money we are going to lose.

I made the most profits from buy and hold positions. I missed the most profits from selling too early. Therefore, my motto for investing is “buy and forget,” until I need the money or until my investment hypothesis doesn’t hold anymore. For example, when I buy a stock because it’s a value stock and it’s already overpriced according to the metrics I follow, it might be the time to sell it.

4. Markets are rational and they price all assets correctly.

Markets are made by humans. Humans are not rational all the time. Therefore, markets are not rational all the time. In the short term, markets can behave irrationally, just like the crypto-bubble we have been experiencing lately. In the long term, markets are forced to behave rationally, because there aren’t infinite resources to feed the irrationality. This happens through corrections and crashes. Don’t bet on it that the markets will correct themselves quickly. This can take a lot of time, more than you can endure. For that reason, it’s wise to avoid betting against the markets and taking short positions.

5. One can make profitable trades based on news and opinions.

Most of the news are already expected and factored in the prices. Therefore, they don’t move the prices that much. The news that move the prices move them so fast that it’s impossible for you and me to take advantage of them.

If you have an opinion about an asset and you’re right, there are probably a lot of others having the same opinion and your opinion is already factored in the prices. If you’re wrong, your opinion is going to lose you money. In both cases, your opinion won’t make much money.

The only exception to that is when you make a thorough research on stocks that are out of the radar. For me, those are the small cap value stocks. They require a lot of research to find. Once I find them, I formulate an investment hypothesis and hold on to them until I need money or the hypothesis doesn’t hold anymore.

6. Buy stocks of good companies to make profits.

I don’t aim to buy the stocks of good companies. I can’t make any money buying the stock of a good company if the stock is already overpriced. I aim to buy underpriced assets. I can make money buying the stock of a mediocre company, if the stock is underpriced.

7. You can predict the future by looking at price charts and technical indicators.

I don’t believe in technical analysis. It’s a fallacy of our brains to look at price charts and see patterns. It’s a greater fallacy that the same patterns are going to repeat themselves in the future. This is actually an extension of the irrational assumption #5, “one can make profitable trades based on news.”

Price charts are public news. Everybody knows them. If they were useful, everybody would use them. If everybody tried to use them, they would be useless. As a result, technical analysis is useless. You’re better off investing in an index fund every month than wasting your time with technical analysis.


You might think that these assumptions being irrational is bad news. You might think that these assumptions are your only way to make money investing. You might think that I’m pessimistic for calling these assumptions irrational. On the contrary.

These assumptions being irrational is good news for us. It takes a lot of stress away from investing. We know that we can’t predict the most profitable asset. We can’t predict the most profitable time to buy and sell. We can’t make money from the news, technical analysis, our opinions, or picking stocks. At the same time, we know that our savings in fiat currency are going to lose their value over time. The best strategy to act on these assumptions is to build a diversified portfolio over time. That also saves us a lot of time to follow the news, thinking about the markets, and doing technical analysis.

If you want to invest actively and if you have the time and willingness to do your homework, we also know that small cap value stocks have a higher probability to beat the market.


This post is for information purposes only and not intended to be investment advice.

The Best Investment Strategy for Retirement

If you plan to retire sometime in the future, you must start saving and investing as soon as possible. The first few years in investing is spent with learning and gaining experience. That means, you will make some mistakes and lose money.

The best way to minimize losses is to start small and start virtual. By virtual, I mean practicing in virtual exchanges with real world, real time stock exchange data. That way you avoid losing money while you are gaining experience.

Hindsight Bias

When you first start investing, you look at the price charts and you think that you can buy at the lows, sell at the highs, and make a living doing that. What is the best investment strategy based on that assumption? Find an instrument that will make the greatest price move in your favor and go all in on that.

Nothing can be further from the truth. This is a perfect example of hindsight bias. Trying to call the tops and bottoms of a market is a typical novice mistake.

In real time, it’s impossible to correctly predict which assets are going to increase or decrease in value, and which levels are the top and bottom. The prices might seem to be too high and they can go higher. They may seem to be too low and they can go lower.

Now, stop reading and think about the sentence above and the following question.

What is the best investment strategy based on that fact?

You might come up with the following answer. “If it’s impossible to know which asset will appreciate or depreciate in value, then it’s better to not invest at all.” That answer would be correct, if your base currency, USD or euro, would retain its value over time. It doesn’t. Inflation is the official policy.

If you keep all of your savings in USD or euro, you are guaranteed to lose value over time.

Let’s go over our assumptions again.

  1. Savings in USD or euro will lose some of their value over time.
  2. We can’t know which asset will appreciate or depreciate in value.
  3. We can’t know which levels are the tops and which levels the bottoms.

What is the best investment strategy based on those assumptions?

The best strategy based on those assumptions that I came so far is to hold a diversified portfolio. That includes index etfs, individual stocks, commodity etfs, some cash, and so on. I hold even some bitcoin in my portfolio. My current bitcoin holding is 4-5% of my savings.

My goal is to be never satisfied with the performance of my portfolio but also never be disappointed with it. I don’t try to be the investor that makes the most money from their investments. My aim is to be the investor that retains the value of their investments and make some profits on top of that. This might not be the sexiest investment strategy. However, it’s a realistic one.

I’m never 100% in a single asset, including cash. That would mean I have some superhuman intuition to see the future and predict the asset that would increase the most in value. I don’t have that kind of intuition. I don’t know any other person that has that kind of intuition.

Sure, there would be people who are 100% in a single asset that would increase at least tenfold in value. They will look like geniuses after that price increase. That’s again another example of hindsight bias. Every few weeks, there’s a person who wins the jackpot in the lottery. Does that mean that the person had the best strategy to spot the correct numbers in lottery?


Savings in USD and euro will lose some of their value over time. The retail investor can’t spot the tops and bottoms of the market. The best investment strategy based on those facts is to build a diversified portfolio over years.


This post is for information purposes only and not intended to be investment advice.