In recent times the world has witnessed the implosion of FTX. At the same time, Elizabeth Holmes, the once golden girl of tech valley, was sentenced to 11 years in federal prison for securities fraud. Meanwhile, in Eastern Europe, Vlad Putin is busy trying to force a whole sovereign country full of citizens to revert to Soviet style serfdom based on some twisted world view. What do these 3 disasters, along with the legion other examples you might be thinking of, all have in common? Well, as an illustration of my central point in this blog post, I would offer the following “golden thread”; having smoke blown up your arse is insidious and deadly.

Avoiding “arse smoke” and managing those who blow it is an important life skill and guiding principle. In psychology academic speak, it is called avoiding “confirmation bias”. Confirmation bias is the tendency of people and institutions to favour information or explanations which agree with and/or strengthen their existing views & practices.  We could add that it also involves the tendency to reject the individuals and ideas who/which challenge, contradict or detract from one’s existing modus operandi.  Fighting against it is an idea that should be encouraged to permeate throughout one’s entire life as much as possible. Only by keeping an open mind, asking good questions, and honestly listening to people’s answers can we evolve to a better understanding of the various markets in which we all operate.

In a commercial sense, market validation is the best way to avoid confirmation bias. Replacing “yes men” with honest people is the only way a business or idea or country can progress. Don’t ever believe hype – particularly your own. Always be humble and seek to learn more so that you may grow in knowledge and earnings. Be a constant student of whatever game you are playing and always try to guard against pride and ego. It’s important to remember that things are seldom ever as bad or as good as they seem, and to be measured & calculating in your response to everything. Acting with equanimity, patience and courtesy is the essence of personal quality. We should all strive to be higher quality people.

In that spirit, we should seek out and appreciate contrarians and try to listen to and learn from them. An educated and rational contrarian, one who acts with equanimity, is the ultimate antidote to wishful thinking. Good tax accountants apply their knowledge of the tax law to real world numbers to prospectively guide a client’s decisions to reach tax optimal outcomes. The job of honing and perfecting this skill is lifelong. With humility and a commitment to lifelong learning, a tax accountant becomes more useful to a client with every passing day. The opposite is also true.

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