Hi, Friends
Welcome to my first issue.
If this newsletter was forwarded to you
I spent most of this week on Twitter following the stock maniac, WallStreet bet subreddit watching memes and listening to their telegram calls. Learning to avoid junk content this year but this week seemed to be based on junk content, specifically memes of $GME, Elon and Bitcoin.
Pictures
Story
When people continue a behaviour because they have already committed resources (time, money, energy) to that action, this is known as the sunk cost fallacy.
Here is a tale
When I came back home last October, I needed a valid ID as most places do not accept student ID cards nor the slip from NIMC. I needed either a voter’s card, a driving license or a national passport which I had none. So I told my mom I need a driver’s license and that she should help me talk to the guy that did hers.
She did, the guy said I had to pay for a driving school to get a certificate which would then be used to process the driver’s license.
After paying the said I’d have to wait for 6 months before it was ready, this was where he lost me. I need the driver’s license fast. I had already accepted that I had to wait for half a year when he contacted again to pay 15k for a license of 5 years. My dad got wind of it and that he doesn’t think it was that expensive. He confirmed from his friend, and it happens to be so.
I had to options to continue with this guy or go for my dad’s friend.
But I had already paid for the certificate.
What would you do?
Another scenario, I was eating, and I added spice to my food, turns out that wasn’t the spice I loved, I was already more than halfway through the food, and the spice wasn’t bad either. So what do I do? Continue eating or stand up and get the spice I actually want?
In investing, when an investor buys stocks of a company, and then it turns out to be a not so good purchase, most investors hold that stock because they are scared of losing the cost of their initial investment instead of going after a great purchase.
How to avoid Sunk Cost??
Simple; Don’t flog a dead horse.
When you have multiple options, or as in the case above two. It would help if you compared your pros and cons while ignoring the expended resources. Then choose the one with the better outcome.
Ignoring the effort, time spent is the hard part.
My Writings
Readings
Here are my favourite readings on the internet:
How to Take Smart Notes: A Step-by-Step Guide by Nat Eliason
Why 2021 will be a year of reckoning for Big Tech by Scott Galloway
Tools and Resources
From the numerous tools, websites and apps I find fascinating:
A Beginner’s Guide to Defi
That wraps up this week’s newsletter.
If you want to discuss any of the ideas mentioned above or have any books/papers/links you think would be interesting to share on a future edition, please reach out to me by replying to this email or sending me a direct message on Twitter at @iamuhammadtahir.
Until next week, take care!
Muhammad Tahir.
If you find this useful, don’t forget to spread the word.