Fix it Friday Episode 1

• Success in business does not automatically translate to success in investing. Successful businesspeople often need help investing, such as overconfidence bias, where they believe their business acumen guarantees investment success. This can lead to poor decision-making, and they may need more behavioral guidance than they realize to avoid costly mistakes.
• Entrepreneurs often thrive by going "all in" on a big idea, investing all their skills, energy, and capital to drive their venture's success—sometimes against steep odds. However, to succeed as long-term investors, they must adopt an opposite approach: spreading their resources across multiple investments to manage risk and ensure steady growth rather than concentrating everything on one high-stakes venture.
• Successful entrepreneurs and executives often fall into costly habits around money and uncertainty, driven by a tendency to attribute success to skill rather than luck. This bias can prevent learning from mistakes, as failures are more likely to be blamed on external factors. Recognizing these tendencies and seeking insights into correct investment strategies can help counteract these biases

Voice Over: [00:00:00] The following podcast by fusion family wealth, LLC fusion is intended for general information purposes. Only no portion of the podcast serves as the receipt of, or as a substitute for personalized investment advice from fusion or any other investment professional of your choosing, please see additional important disclosure.

At the end of this podcast, a copy of fusion's current written disclosure brochure, discussing our advisory services and fees is available upon request or www. fusionfamilywealth. com.

Welcome to the Crazy Wealthy Podcast with your host, Jonathan Blau. Whether you're just starting out or are an experienced investor, join Jonathan as he seeks to illuminate and demystify the complexities of making consistently rational financial decisions under conditions of uncertainty. He'll chat with professionals from the advice world, entrepreneurs, executives,

Jonathan Blau: Hello again, this is Jonathan [00:01:00] Blau, host of the Crazy Wealthy Podcast. Today we're actually introducing the, uh, version of the Crazy Wealthy Podcast called Fix It Fridays, and, uh, it's a very, uh, concise, short, uh, version. That, that's just going to be me, uh, helping to, uh, identify some of the biases, which are systematic errors that we all make in, in making decisions, particularly decisions about money under conditions of uncertainty.

The term fix it is really just because we're identifying a systematic error that we're all by human nature prone to make, uh, how to identify it and how to fix it. Uh, so, so we thought, uh, What better thing to call the, uh, the short version of these podcasts, uh, Fix It Fridays. And they'll be coming out, our plan is, uh, every other Friday.

So this will be the first Friday, and expect to see it, um, on, uh, on our LinkedIn site, uh, Facebook, our website, FusionFamilyWealth. com, uh, on, on, on an every other Friday basis. And, uh, so [00:02:00] again, welcome to the first episode. What I thought would be interesting to talk about in the first episode, uh, is. Biases and, and, and mistakes about money and uncertainty kind of, uh, may only be viewed to impact people who might not be sophisticated investors.

And, and, um, I've always said is we have a reflexive association between wealth and wisdom, particularly when it comes to. Money decisions in particular comes to investing. What I mean by that is we automatically assume that if somebody's successful in business, that that would translate because they're wealthy and successful, uh, and proven, so to speak in business, that, that, that the skills that led them to be successful in business in their mind and, and the outside world's mind should definitely lead them to be able to be successful investors.

And, uh, not in my experience, nothing could be farther from the truth. And in fact, Uh, the wealthier, uh, more successful we are, uh, we tend to meet, uh, [00:03:00] behavioral counseling even more for two reasons. One is we, because of our success, we develop what's called overconfidence bias. And what that means is that, uh, it's kind of like if you ask a hundred drivers in a room, how many of you consider yourself to be above average?

More often than not, close to a hundred hands go up. By definition, only half the room could be above average. Uh, and that's how we think of ourselves. So when we're successful, we tend to get, uh, overconfident in our abilities. And so that overconfidence bias acts like a magnifying glass, meaning that, uh, human nature And the mistakes we make about decisions and money are pre programmed into all of us.

Human nature is immutable, doesn't change. We all react to fear, greed, envy, uh, the same way. Regardless of how well educated we are, we're human beings. And, uh, and when we are overconfident, we basically overconfidence like a big magnifying glass that we hold all those biases that we are prone to just as much as everybody [00:04:00] else.

But we're, we're, we're, we're magnifying them by, by, by an order of magnitude, uh, because of our overconfidence. So one of the first examples I'll give is, is, uh, entrepreneurs who are successful and executives who are successful are oftentimes running businesses that have multiple divisions and, uh, they, they tend to look.

Uh, often quarterly at the divisions and they'll say, gee, you know, these, these two divisions are doing poorly for the last two quarters. So maybe I'm going to jettison them. I'm going to sell them off, close them down. I'm going to take the resources that were supporting those, what I call failing divisions and put those resources into the divisions that are doing really well, knocking the lights out.

And, and that's good when you're managing a business in many senses. But when you're running a portfolio, an investment portfolio, that by definition, Is diversified. So for example, might invest in a large companies in the U S and small companies in the U S because they tend to do better than the other [00:05:00] at times and to magnitudes that are unpredictable, uh, U S companies versus international companies, and then there are two main styles of investing value, uh, which tends to find companies that are selling it at discount to what their fair value is oftentimes, because there's some problem with the company or industry that short term.

But investors treat as long term, so they sell, uh, they sell off those, those companies thinking that the problem will get resolved and they sell at a discount. And then growth, which is the other style. Growth are companies that are selling at a premium to the average company because investors expect that the growth of their earnings will also be premium.

to the earnings of the average company. And so those two styles go in and out of favor, uh, at times, and again, magnitude's unpredictable. And so what happens is, when a, when an entrepreneur or an executive who's used to jettisoning, uh, underperforming, uh, divisions, and putting money into outperforming divisions, they tend to look at their portfolio, uh, diversification mechanics the same way.

Meaning, uh, instead of in the late 90s [00:06:00] saying, wow, uh, these tech stocks that I, uh, Developed a big exposure to because how much they've grown, uh, look overvalued and, and, and the, uh, international emerging markets, uh, stocks look undervalued. They haven't done much in the last eight years going into 2000.

So let me buy more of the emerging markets and let me sell some of the expensive. That's not what they do. What they do is they look at the sectors that are meant to diversify each other by performing. Differently than each other at different times, they tend to look at them at division. So let me get rid of the emerging markets because it's a bad division.

It's not an undervalued sector in my diversified exposures. And let me take the proceeds from that and pour it in at the very top of market valuation. To the division that I have the, the, the, the technology, large companies in the US, uh, Lewis and technologies, AOL, et cetera, back in 1999. And let me put all the money that I, I get from selling the undervalued, um, division, [00:07:00] uh, instead of the division that I look at in business, that's not performing well, the undervalued division, I put it into the overvalued division, the tech stocks, uh, just in time, uh, to go into the next decade from 2000 to 2010, uh, where, uh, Emerging markets, as in this example, make 200 percent and technology stocks lost 60 percent for that decade.

So, so it's a big mistake that we make, uh, as entrepreneurs and executives who are successful and used to managing your portfolio, uh, the same way they might manage the business. The other thing that's a challenge for entrepreneurs and executives who are successful Is that they, um, they, they tend to, uh, particularly in the case of entrepreneurs need skills to build their companies and their wealth from entrepreneurship that are not just different than the skills needed to succeed as a long term investor.

But oftentimes the skills are opposed to them, meaning that, uh, entrepreneurs to succeed go all in Take, take all their skills, all their energy and all their money and put it into, oftentimes, one big [00:08:00] idea. And, and they ride it. And, and if it were, and, and it's, and it's, it's against all odds of success usually, but they succeed in, in, in some cases.

And so, In order to succeed as an investor, you need to do the opposite. You need to not concentrate all of your energy and money into one, uh, companies or sector, but to spread it out and diversify. The goal with investing is not to find what's the best for you, highest returning business I can invest in and borrow maybe to invest in, but what is the, uh, what are the best returns I can find that I can likely stay with for multi decades because compounding.

Is just returned to the power of time where time does all the heavy lifting. So investors need to be patient, uh, and disciplined, uh, much more than entrepreneurs do. Do So, uh, thinking that our success as entrepreneurs and executives is translatable, uh, into success as investors, not only is, is, is, is, uh, in my experience, untrue, [00:09:00] but oftentimes the wrong way around.

The overconfidence that we develop because of our success as entrepreneurs and, and, uh, and executives, uh, leads to worse and more costly, uh, behaviors when it comes to money and uncertainty. The other thing I'll say is, um, when we're, and I'm an entrepreneur who's successful, fortunately, so I, I relate to it.

Uh, we tend not only to be overconfident, but we also tend to attribute much less, uh, uh, luck to our success. than skill. The causal relationship of skill is something that we often always look to, uh, to, to account for our successes. We only look to luck, um, when, when it, when we don't succeed, we look to blame an outside factor and that leads to, uh, not learning from our mistakes and so forth.

So when it comes to investing, all you successful entrepreneurs and executives out there, uh, Don't discount, uh, the benefits that you might get from listening to our podcast, uh, and, and learning, uh, some of these biases. So, hopefully you enjoyed the first episode of, [00:10:00] uh, Fusion Fix It Friday, uh, and, uh, and if you want to, um, access the episode, you could go to FusionFamilyWealth.

com, uh, podcast section, uh, and also the episode will be available on all the major podcast, uh, channels, like, uh, uh, And, uh, Spotify, et cetera. Uh, and of course you can go to crazy, wealthy podcast. com, uh, as well. So thanks again for tuning in. Look forward to seeing you on next fix it Friday.

Voice Over: Thank you for tuning in to another episode of the crazy wealthy podcast for more insights, resources, and to sign up for a newsletter, Visit crazy wealthy podcast. com until then stay crazy. Wealthy

previous podcast by fusion family wealth, LLC fusion was intended for general information purposes only no portion of the podcast searches the receipt of, or as a [00:11:00] substitute for personalized investment advice from fusion or any other investment professional of your choosing. Different types of investments involve varying degrees of risk, and it should not be assumed that future performance of any specific investment or investment strategy or any non investment related or planning services, discussion or content will be profitable, be suitable for your portfolio or individual situation.

Neither Fusion's investment advisor registration status nor any amount of prior experience or success should be construed that a certain level of results or satisfaction will be achieved if Fusion is engaged or continues to be engaged to provide investment advisory services. Fusion is neither a law firm nor accounting firm, and no portion of its services should be construed as legal or accounting advice.

No portion of the video content should be construed by a client or prospective client as a guarantee that he or she will experience a certain level of results, If Fusion is engaged or continues to be engaged to provide investment advisory services. A copy of Fusion's current written disclosure brochure discussing our advisory services and fees is available upon request or at www.

fusionfamilywealth. com.