I'm no day trader, and this is not a blog about finance. It is a column that will use last week's stock market plunge to illustrate a dangerous leap in logic that many of us fall prey to at work. This won't immediately add zeros to your portfolio, but if addressed, it will pay dividends for you in the future.
Flashback to last Monday. My portfolio was up over $8,000. Regarding this, the second biggest gain I've had this year, my fiancée asked, "You've had a great day. Where is the celebration?" I shrugged my shoulders and thought to myself, why celebrate now when even better days are just around the corner? Talk about whistling into the graveyard.
Then came Tuesday's $6,000-plus loss. Ouch. My portfolio felt like it had been visited by Oscar the cat (the feline featured in the New England Journal of Medicine for his ability to sense when a nursing home patient is about to die). My fiancée observed my sullen stare and asked, "Doesn't this still leave you up $2,000?"
I was slack-jawed. She was right. I had so totally hyperfocused on the day's loss that I completely lost sight of the fact that I was still up for the year, month and week. OK, it was a short-lived gain for the month and the week, but it highlights the tendency that most of us have to overfocus on bad news and to take good news for granted.
Which reminded me of my finance professor from my MBA program -- not for his investment advice but for his lecture on sunk costs.
Sunk costs is the term for an investment that has already been made and can't be recovered. It can be an investment in the foundation of a building or in research on the market or on a competitor.
The challenge of sunk costs is that you are always advised to forget that the investment has been made and to look at all future investments asking only one question: Is this the best use of our money right now? Think of it as a short course in what-have-you-done-for-me-lately thinking.
Sunk cost examination requires you to turn your brain into an Etch a Sketch, to erase everything that's happened in the past and only evaluate your options moving forward.
When I wrote the title to this blog, "The Dow at Work," I realized that there was a serious pun in there with Dow and Tao (OK, maybe I've invested too heavily in Chinese mutual funds). In Taoist literature, Tao stands for "the path" or "the way." To quote Wikipedia, "Fulfillment in life cannot be attained by forcing one's own destiny, instead, one must be receptive to the path laid for them by nature and circumstance, which will themselves provide what is necessary."
Paying closer attention to nature and circumstance -- advice that works in terms of your investments and your job. What a concept.
Quote of the Week
"I don't want to make money. I just want to be wonderful." -- Marilyn Monroe
Book Excerpt of the Week
"What Got You Here Won't Get You There" by Marshall Goldsmith (Hyperion)
"Benchmarking -- the notion that there is a performance ideal exemplified by people and organizations -- is one of the biggest hazards in getting people to change for the better. It's not that there isn't something to be gained from modeling ourselves against the best in their category. But it can do more than harm than good if applied poorly. Sometimes the desire for "perfect" can drive away "better."
Bob Rosner is a best-selling author, an internationally syndicated columnist, popular speaker and a recent addition to the community of bloggers. He welcomes your comments at firstname.lastname@example.org.
This work is the opinion of the columnist and in no way reflects the opinion of ABC News.