“The first product of self-knowledge is humility.” – Flannery O’Connor
By the end of the Civil War, Ulysses S. Grant and William Tecumseh Sherman were two of the most respected men in America. They were the architects of the Union’s victory over the Confederate army. However, after the war, they took very different paths. Both were asked to run for public office following their success in the war, but Sherman declined on a number of occasions and retired to a life of relative calm and happiness.
Grant, on the other hand, couldn’t resist the pull of politics and it led to his undoing. Ryan Holiday explains in his book, Ego is the Enemy:
Grant, who had expressed almost no prior interest in politics, and, in fact, had succeeded as a general precisely because he didn’t know how to play politics, chose instead to pursue the highest office in the land: the presidency. Elected by a landslide, he then presided over one of the most corrupt, contentious, and least effective administrations in American history. A genuinely good and loyal individual, he was not cut out for the dirty world of Washington, and it made quick work of him. He left office a maligned and controversial figure after two exhausting terms, almost surprised by how poorly it had gone.
After the presidency, Grant invested almost every penny he had to create a financial brokerage house with a controversial investor named Ferdinand Ward. Ward, a Bernie Madoff of his day, turned it into a Ponzi scheme, and publicly bankrupted Grant. As Sherman wrote with sympathy and understanding of his friend, Grant had “aimed to rival the millionaires, who would have given their all to have won any of his battles.” Grant had accomplished so much, but to him, it wasn’t enough. He couldn’t decide what was important— what actually mattered— to him.
The politicians and wealthy elite of his day were all jealous of Grant’s success on the battlefield, but he was just as jealous of their political power and wealth. Ego left a proud war hero nearly penniless when he died. I think the polar opposite of ego is contentment and it seems that Grant just couldn’t find his own contentment in life after the war.
Ego can come from a number of sources — overconfidence, hubris, pride, arrogance and a lack of self-awareness. It can also lead to your downfall by increasing your blind spots, especially when you’re an expert in any field.
My favorite example of this (which I included in my book) is the story of Stephen Greenspan. Greenspan is a psychologist whose research focuses on gullibility and human fallibility. In December of 2008, he released a book that included all of his findings on our human failings called Annals of Gullibility: Why We Get Duped and How to Avoid It.
That very same month was when Bernie Madoff’s $65 billion Ponzi scheme finally unraveled and came to light after years of lies and deception. Here’s the kicker — Greenspan himself was a Madoff investor. The guy who literally wrote the book on gullibility was duped in the largest Ponzi scheme of all-time.
He was a good sport about it all and even wrote a story in the Wall Street Journal to explain where he went astray and share some lessons learned:
In my own case, the decision to invest in the Rye fund (a feeder fund invested with Madoff) reflected both my profound ignorance of finance and my somewhat lazy unwillingness to remedy that ignorance. To get around my lack of financial knowledge and my lazy cognitive style around finance, I had come up with the heuristic (or mental shorthand) of identifying more financially knowledgeable advisers and trusting in their judgment and recommendations. This heuristic had worked for me in the past and I had no reason to doubt that it would work for me in this case.
My belief in the wisdom of this course of action was so strong that when a skeptical (and financially savvy) friend back in Colorado warned me against the investment, I chalked the warning up to his sometime tendency towards knee-jerk cynicism.
Both Grant and Greenspan failed to have a clear understanding of what they were getting themselves into. They ventured outside of their circle of competence and it cost them dearly.
I’m always amazed at how often it is I read about another new Ponzi scheme in the news. It’s a regular reminder of the Dunning-Kruger effect. Some people just cannot accept or recognize that there are certain areas of life where they lack the competence or expertise to be successful. We make it a habit of allowing our own egos to overwhelm any mounting evidence of our own ignorance.
People hate to admit that they don’t know everything. That they have more to learn in this life. Or see others succeeding where they aren’t. We have a hard time imagining how we could be wrong or seeking out the advice of others who may tell us things we don’t want to hear.
It’s not always easy, so I’m constantly trying to remind myself how much I don’t know and still have to learn.
Richard Feynman once said, “The first principle is that you must not fool yourself – and you are the easiest person to fool.”
This is why ego can be so self-destructive. We often don’t even realize we can end up being our own worst enemies much of the time.
The Personal Success Equation
Now here’s what I’ve been reading this week:
- Is forecasting always folly? (Dash of Insight)
- Time is all you have (Irrelevant Investor)
- Time will tell (Jonathan Clements)
- 10 lessons learned from blogging (Fortune Financial)
- How Josh navigated 2016 in the markets (TRB) and (TRB)
- How performance cycles determine investor attitudes towards international stocks (Meb Faber)
- A history of global living conditions in 5 charts (Our World in Data)
- Portrait of the investing columnist as a young man (Jason Zweig)