Because I was one of the few people who foresaw this situation, I began to get a lot of attention. The US Congress held a hearing on the crisis and invited me to testify. 165438+ 10, I became a special guest of Louis Rukeyser Wall Street Week, which is a must-see program for people engaged in market transactions. On both occasions, I confidently declared that we were heading for depression and explained the reasons.
After Mexico defaulted, the Federal Reserve increased the money supply to cope with economic collapse and debt default. This led to a record rise in the stock market. Although this surprised me, I interpreted this phenomenon as a conditioned response of the market to the Fed's actions. After all, after 1929 and the stock market rose 15%, there was the biggest plunge in history. In June 1982, I wrote down my diagnosis of this situation in the memo. I think the Fed's efforts have failed, and the probability of economic collapse is 75%. The Fed's actions succeeded in stimulating the economy at first, but the probability of failure in the end was 20%. The Fed has provided enough stimulus to save the economy, but the probability of hyperinflation is 5%. In order to avoid the most unfavorable possibility through hedging, I began to buy gold and treasury bonds futures as a hedge against European dollars, which is a risk control way to bet on the deterioration of credit problems.
But I am all wet. After a period of delay, the American economy responded to the efforts of the Federal Reserve and recovered in an inflation-free way. In other words, while the inflation rate is falling, the economic growth is accelerating. The stock market started a big bull market. In the following year 18, the American economy experienced the most prosperous period of inflation-free growth in history.
How did this happen? Finally, I found the reason. Everything has changed with the massive withdrawal of funds from debtor countries and their return to the United States. This makes the dollar appreciate and puts deflationary pressure on the US economy, so that the Fed can cut interest rates without aggravating inflation. This has promoted economic prosperity. Banks were protected because the Federal Reserve lent them cash, and because the creditors' committee and international financial restructuring institutions such as the International Monetary Fund and the Bank for International Settlements made arrangements to enable debtor countries to meet their debt repayment obligations by borrowing new debts. This is equivalent to everyone assuming that everything is fine, and then gradually writing down those bad debts over many years.
My experience during this period is like being hit on the head by a bat. It is extremely humiliating to make such a big mistake, especially in full view, and I almost lost everything I created in Qiaoshui. I found that I used to be a self-righteous fool and stubbornly believed in a completely wrong view.
This is the situation after I started my business for 8 years, and I have accomplished nothing. Although I was more right than wrong, I suddenly returned to the original point.
During that time, I lost so much money that I was unable to pay the salaries of the people I worked with. I had to let them leave one by one, leaving only two employees-Coleman and me. Then Coleman had to leave, and in the tears of everyone, his family packed their bags and returned to Oklahoma. So there is only one employee left in Qiaoshui-myself.
Losing someone I care about so much, my dream of working for myself will almost be destroyed, which is devastating to me. To make ends meet, I even had to borrow $4,000 from my father until I sold my second car. I came to a fork in the road: should I wear a tie and go to Wall Street to find a job? That's not the life I want. On the other hand, I have to support my wife and two young children. I realize that I am facing one of the most important turning points in my life, and my choice will have a great impact on the future of me and my family.
It is difficult to make money through market transactions. In this regard, bernard baruch, a talented trader and investor, vividly said: "If you are ready to give up everything else, study the whole history and background of the market as carefully as medical students study anatomy, and study all major listed companies-if you can do all the above, and you still have the gambler's calmness, sixth sense insight and lion's courage, you can seize an opportunity."
Looking back, the mistake that led to my collapse was obviously embarrassing.
First, I am ridiculously overconfident and addicted to being influenced by emotions. I realized (once again) that no matter how much I know, no matter how hard I try, I can't confidently make an absolute assertion, as I said in Louis Rukeyser's Wall Street Week: "A soft landing won't happen. I can say with absolute certainty because I know how the market works. " Today, I am shocked and embarrassed by my self-righteousness.
Second, I once again realized the value of learning history. After all, what happened at that time was just "a repeat of the old things." I should realize that the debt denominated in a country's currency can be successfully restructured with the help of the country's government. When central banks provide stimulus at the same time (they did it in March 1932, when the Great Depression bottomed out, and did it again in June 1982), inflation and deflation can offset each other. Just like in 197 1, I failed to understand the lessons of history. Knowing this makes me try to understand all the activities of all major economies and markets in the past 100 years, and sum up those eternal and universal decision-making principles that have been carefully verified.
Thirdly, it reminds me how difficult it is to grasp the timing of the market. My long-term estimate of the market equilibrium level is not reliable enough. Too many things will happen (if they really happen) between my bet and my estimate.
Staring at these failures, I understand that if I don't want to encounter major setbacks with great probability and move on, I must look at myself objectively and make changes. I always show natural initiative when pursuing my goals. I want to learn better ways to deal with this aggression, which can be the starting point for my change.
Imagine that in order to live a good life, you have to cross a dangerous jungle. You can safely stay where you are and lead a normal life; You can also venture through the jungle and live a wonderful life. What do you think of this choice? Take some time to think about it, because no matter what form it takes, it is a choice that all of us must make.
Even after my failure, I know that I have to take all kinds of risks to pursue this wonderful life, so my problem is how to "cross this dangerous jungle" without being killed on the way. In retrospect, my failure was one of the best things that happened to me, because it made me humble, and I needed humility to balance my aggression. I learned a good feeling of being afraid of making mistakes, which changed my mind from thinking "I am right" to asking myself "How do I know I am right". I clearly see that the best way to answer this question is to find other independent thinkers who have the same mission as me but have different views on the problem. By communicating with them in a thoughtful way, I can understand their reasoning and let them stress test my reasoning. So we can all reduce the possibility of making mistakes.
In other words, my goal is just to get myself right-I don't care if the correct answer comes from me. So I learned to keep an extremely open mind and allow others to point out what I might have overlooked. I found that the only way I can succeed is:
1. Find the smartest people who have different views from mine, and let me try to understand their reasoning.
Know when you can't have a clear opinion, and don't jump to conclusions.
3. Gradually sum up the eternal and universal principles, test them and make them systematic.
4. Balance risks to maintain large returns and reduce downward fluctuations.
Doing so will significantly increase my income relative to risk, and the same principle can be applied to other areas of life. Most importantly, this experience has enabled me to build Qiaoshui into a creative and achievement-based institution. It is not an authoritative organization, led by me and followed by others; It is not a democratic institution, and everyone has equal voting rights; On the contrary, it is a creative organization that encourages deliberate disagreement and analyzes and weighs different people's views according to their comparative advantages.
Making people's opposing views public and analyzing them has given me a lot of understanding of people's way of thinking. I gradually found that people's greatest shortcomings and greatest advantages are both positive and negative. For example, some people tend to take excessive risks, while others are too risk-averse; Some people pay too much attention to details, while others think too macroscopically. Most people are excessive in one aspect and insufficient in another. Usually, when we follow our nature, we may not consider our weaknesses, which will lead to our failure. The most important thing is what to do after failure. Successful people change their practices so that they can continue to make use of their own advantages and make up for their own shortcomings, while unsuccessful people will not do so. In the following article, I will describe specific change strategies, but it should be noted here that only when you can admit or even accept your weaknesses can you make changes that are beneficial to you.
Later, I found that most of the extremely successful people I met experienced similar painful failures, which taught them lessons, and it was these lessons that finally helped them to succeed.
When Steve Jobs recalled his dismissal from Apple at 1985, he said, "This is a bitter medicine, but I guess patients need it. Sometimes life will give you a blow. Don't lose heart. I am convinced that the only motivation for me to keep moving forward is that I like what I do. "
I found that if you want to pursue Excellence, you must challenge your own limits, and challenging your own limits may make you fall down and cause great pain. You will feel that you have failed, but this is not necessarily a failure unless you give up on yourself. Believe it or not, but then your pain will gradually dissipate, and there will be many other opportunities in the future, even though you may not see clearly at that time. The most important thing you can do is to sum up the lessons provided by these failures, learn to be modest, learn to be extremely open-minded, thus increasing your chances of success, and then continue to challenge your limits.
My last lesson is probably the most important one, because it has been used repeatedly in my life. At first, I seemed to be faced with a choice of "get it all or lose it all": either take huge risks in pursuit of high returns (and may fail in the process); Or reduce your own risk and be satisfied with getting a lower return. But what I want is to take low risks and enjoy high returns. In the process of exploring how to make it possible, I learned that when faced with two seemingly contradictory things that you both need, you need to make a patient choice. In this way, you will explore how to have both as much as possible. There is almost always a favorable road that you haven't found yet, so you need to keep looking until you find it, instead of being satisfied with the obvious choice for you at first.
Although the process was very difficult, I finally found a way to kill two birds with one stone. I call it "the Holy Grail of Investment", which is the reason for the success of Qiaoshui in The Secret Behind.