The secret to being financially successful is to always admit how little you know.
Do you consider yourself a knowledgeable person? Wise even?
If so, you’re in for a shock.
True wisdom lies in realizing how very little you actually know and admitting it. The ancient philosopher Socrates considered himself wise for admitting: “I know that I know nothing.”
This philosophy should also apply when you learn new things: don’t fool yourself into thinking you now suddenly know a lot, but instead pause for a second to look around.
It is a fact of life that the acquisition of new knowledge simultaneously illuminates further areas of ignorance, if we choose to observe them.
For example, once you learn about the fundamental basics of the theory of relativity, you cannot help but encounter its more complicated and sophisticated areas, which make you realize that there’s a lot more you don’t yet understand. If anything, you now feel yourself more ignorant than before!
Unfortunately, most people fail to realize how little they know, especially in the field of finance. In fact, studies have shown that most adults struggle to use even basic financial formulas – for example, calculating compound interest. What’s worse, they also tend to charge ahead with their tiny knowledge base without pausing to consider all the areas in which they are ignorant.
For example, some people learned the basics of investing in risky subprime mortgages and thought they knew enough to attain wealth through them, but failed spectacularly in 2008 because they had not paused to learn more about their investment. They forgot to ask questions about the sustainability and riskiness of the instrument.
If you do go that extra step and study finance, you can take of advantage of the ignorance of others who didn’t bother. This might, for example, help you spot investment opportunities before others or make lucrative trades with them.