Fun fact: Robo-advisor startup Betterment has a book club.
Recently, they read Stephen Dubner and Steven Levitt’s “Think Like A Freak.”
So when Betterment founder and CEO Jon Stein interviewed Dubner, he asked how investors could think like freaks about their money.
Of all the insights in the book, Dubner boiled the key advice down to one simple concept:
Acknowledge what you don’t know.
He went on to explain that many people who have earned enough money to be able to invest think they must be smart enough to “figure this out.”
“But if ‘figure this out’ means ‘I’m gonna put all 20 grand on Blackberry today because I think that they just have to come back somehow,'” Dubner said, “that is assuming a level of knowledge there’s just no reason you should have access to.”
There’s even a $US5 word for it: ultracrepidarianism, or the belief that because you’re an expert at one thing, you must be equally proficient at others, and are eager to share advice in those fields. “Doctors are really good at that,” Dubner quipped.
The good news is that there are people out there who do know, he explained. Those of us who are skilled in an area other than personal finance shouldn’t be taking time away from improving that knowledge to learn every detail about managing money. “Don’t think it’s this thing you need to figure out how to do, because people have already figured it out,” Dubner continued. Rather than become one of them, we should capitalise on their knowledge.
Watch his entire answer in the video below:
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