A friend was asking me how to deal with a loved one who had put nearly all of his assets into a particular volatile stock and done very well. So far. The person is in their 30s with a family and my friend is concerned that if things go the other way this could be the type of thing the household might not recover from.
I asked the basic questions which of course my friend also asked. What’s your plan if the stock falls? “Probably buy more”.
Do you have a target where you’d be willing to sell any of the shares? “If it doubles again, I can retire so nothing before then.”
We can sit here and talk about risk management and yadda yadda. But I’m gonna share something personal which makes me think this has nothing to do with rational finance thought.
I’m close with people that have been taken in by pretty obvious scams. All the red flags. But the people I know are smart people. People that can compute an interest rate and all. They don’t tell me about the “great opportunity” because they know I’ll plead with them to not do it.
Predictably, they get burned. (I’m not supposed to know that because they don’t want to hear I told you so. But I know.)
They fall for this because they want to believe so badly that their better judgement doesn’t stand a chance. I’m totally nonplussed by this. It’s fascinating that we are capable of this. It explains quite a lot, good and bad, actually. But it’s not suprising if you pay attention.
But here’s the part that I found surprising and discovered on a lark.
In the aftermath of the scam, I spent 2 hours on the phone with a victim. I was standing in my kitchen of the last house. Beautiful day outside. Brutal conversation. Emotional. Just trying to make sense of it in a way where we could at least salvage some vague sense of growth out of the closure. At the tail end of our call, I asked a question that I still find peculiar but somehow felt appropriate:
“Did you need to lose that money?”
Silence.
I could hear them think.
“Maybe”.
We talked about it. There was nothing that could have been done. No warning I could have given would have talked them out of it. They admit to that.
I think about this a lot.
I told my friend whose concerned about their loved one this story. And the friend’s face dropped. They know what they’re up against.
(We actually came up with 2 proposals that he could bring to the loved one to change the shape of this death wish, we’ll see if either find reception.)
Anyway, as BTC has been dropping, this thread has been on my mind because there are a lot of cult leaders who benefit from persuasion but aren’t accountable to their followers’ families if they’re wrong.
I’ll just leave you with a tweet I sent Tuesday:
Sitting down at a table without a budget is a commitment to playing til you’re wiped out.