The Danger of Polarized Thinking

This might be one of the easiest and simplest ways for you to INSTANTLY begin making better decisions in your life.

It’s an incredibly common mistake made by almost everyone — especially the media.

In fact, it happens so frequently because most media reports are written by people that don’t actually understand what really drives an economy, or how to invest.

And since most people (tragically) take what they see on TV news and in the newspaper as “fact”, it gets amplified and ends up leading the majority of people to wrong conclusions.

You’re about to learn not only what this massive danger to your success actually is, but how to eliminate it permanently.

I call it “The Danger of Polarized Thinking”, and it comes down to thinking about things in terms of “duality”.

“Polarized Thinking” Explained

Some people call it “black and white thinking”, referring to something either being one or the other. That there is no spectrum or grey area in which the possibilities fall.

Duality implies that something can only be one or the other, but not both (and that there’s no other option).

On and off. Up and down. Good and bad. Fast and slow. Increasing or decreasing.

You get the idea.

One or the other, but not both. And certainly not in between, or any combination of the two.

The challenge to this is that when we talk about people, money, politics, business, religion and such complex topics, duality doesn’t work.

Is the real estate market good? Or is it bad?

At any given time, I can go out and make money in real estate – while at the same time, there could be people losing everything they own in real estate.

In the exact same market.

If “the market” were either good or bad, how can this be possible?

The answer lies in the fact that there is no such thing as “the market”.

That’s right. “The real estate market” DOES NOT EXIST.

In the same way, there is no such thing as “the stock market”.

When you think about it, the big national real estate market that you read about or see the talking heads discuss on CNBC is actually a collection of thousands of small, individual markets.

The town you live in, the one 3 hours away, and the one across the country.  And thousands of others.

All of them, thrown together and referred to as “the market”.

Same with the stock market – it’s a grouping of every stock that actually trades on that market, not a single entity or representation at all.

Think about this — any day of the week, you can go into the stock market and lose money .. and that same day, someone else is out there making money as you take a loss. How could that be possible if the market were just “good” or “bad” on a certain day?

Taking it even further, if you know how to do it, you can actually make MORE money on the day that the world thinks the market is “bad”.

And “the economy” is the same thing — it’s a combination of thousands (millions) of individual items and pieces of information, balled together like a bunch of wet towels coming out of the washer.

“The economy is terrible”.

“The market is strengthening.”

“The real estate market is heating up.”

It’s what the daily business headlines are made of.

Saying this is like having your foot frozen in a block of ice, having your head in a stove at 400 degrees, but the overall temperature of your body is “comfortable”.

It’s exhausting to hear people constantly talk about how the market is “good” or “bad”, because it completely misleads you as an average investor.

Here’s an example of why this is so dangerous:

Let’s say on the same day you buy a stock for $10, it immediately goes up to $30 — and you sell it.  You’ve tripled my money. That’s a 300% return.

But then, you buy another stock for $10 and sadly, that’s the day they announce bankruptcy moments after your purchase .. and lose 100% of your money.

Those are pretty different results, right?

But if we average our results together (-100% return + 300% return), we end up with an “overall market” of 200% return.

The problem here is that the numbers don’t lie – and focusing on the “overall market” completely misleads you to what’s really going on.

(By the way, this is a fundamental trick that the financial industry plays on you to pretend they’re generating better results for you than they are .. but that’s another topic for another day).

Ignore “The” Market and Focus on “Your” Market

One of the fundamental principles when it comes to investing and business is that you need to ignore what’s happening in the bigger market, and know exactly what’s happening in the market where your money happens to be.

This is in the context of a typical investor, not the speculator or “trader”.

If you’re going to be trading commodities and jumping in and out of markets in the same day, this won’t apply to you.

Professional traders rely on the crazy emotions and irrational behaviours that show up in the market to capitalize on them. But unless you’re going to devote your full-time effort to trading or investing, that’s a dangerous thing for you to try and do.

For example, if you’re a real estate investor, you can ignore the national statistics (in fact you should), but you need to get VERY clear on what’s going on in the specific market where you’re investing.

If you’re investing in a certain asset class like precious metals, you need to understand exactly what is going on with the specific type of metal that you are investing in.

What drives that market? What influences the supply and demand? What macro and larger trends are impacting it?

If you really want to start doing better with your money, stop watching shows like CNBC or reading newspapers or blogs that report on “the market”, without giving practical insight into what’s really going on.

Recognize that the overall market reports make for good, emotional stories that sell advertising, but sophisticated investors ignore the big picture and focus on what really matters.

Stop getting sucked into emotional conversations about “the market” and what it’s going to do, and focus on seeing what’s really going on beyond the top line.

This same concept extends to politics. 

An incredibly long and complicated list of issues, views and beliefs are boiled down and somehow packaged into only a handful of different party platforms.

Whether  you’re a Democrat or Republican, you have to subscribe to a long list of positions that you may not even agree with.   Perhaps you believe in free speech, women’s rights, fiscal conservatism, limited government, free health care for everyone and you’re against guns.

There’s no party that will give you all of those positions, so you have to pinch your nose as you go to the ballot box, and vote for the party closest to what you really believe.  And in doing so, you support some positions that you don’t even believe in.

Most people choose a party for the issues that are most important to them individually, and end up supporting positions they’re against simply because that’s how the system works.

This is what happens when Polarized Thinking gets into politics.

No wonder politics is so frustrating and disheartening for most people!

Polarized Thinking is the root of many of the major economic problems we have today. Politics is driven by polarized thinking — in many people’s eyes, you’re either good, bad, smart or dumb simply because you’re associated with a certain political party.

Is that true?

Of course not.

Ok, well maybe if you’re a Democrat.

Just kidding.

See how Polarized Thinking affects you? It just created a reaction in you, maybe good or maybe bad.

The point is that Polarized Thinking creates a lot of emotion, and takes the real focus away from what should be discussed.

Being aware of Polarized Thinking is the first step towards making better decisions with your money and your life.

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