Isn’t it funny how history repeats itself in intriguing ways?
These may all be extreme examples of failed status, fame, or achievement, but it is vital to recognize that greed and overconfidence are two of the most dangerous weapons you can wield.
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In 1625, Charles I inherited the British throne, even though he wasn’t the original heir. He was said to be quiet and shy as a child — mild-tempered, with a slight speech impediment. No demeanor of one to someday rule nations.
Still, history tells us he was also the opposite of a socialite, even as he grew up. He mostly kept to himself, only concerned with his new French wife and their affairs. But, this lord’s temperament and unwillingness to hear anyone out led to his public image becoming increasingly unpopular.
Somewhere along the lines, he lost his head.
His subjects were unhappy with his ideas and methodologies for running an empire. Hell-bent on doing something about this, it seemed this great power and wealth had all gone to his head. See, beyond the crown, Charles inherited something else from his father: The idea of the divine rights of kings. The notion that God was guiding him, so he couldn’t make a mistake.
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There seemed to be nothing about this woman that wasn’t impressive.
By seven years old, she was thinking on a larger scale than most other people. Her first big idea: build a time machine. Two years later, she had already made up her mind that she would become a billionaire.
By the end of her high school career, she was already a business owner. Selling coding software to Chinese schools. By mid-college, she struck gold again, founding a company that we’d later come to know as, Theranos. Theranos was a biomedical company with a lot of scientific and investor interest. The company claimed its technology could detect severe medical conditions by testing a drop of blood — answers, with just the prick of a finger! Eventually, she dropped out of Stanford University at 19 to focus on the demanding, yet explosive business full-time.
And after 21 years of deferring her dream, she had done it. Elizabeth Holmes was the world’s youngest female self-made billionaire.
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Depending on when you caught on to him, he might be most known for his time in South Carolina, New York, or Kansas City.
Football player Sammy Watkins is also known for making a substantial impact right out of the gate. During his freshman college football season, he had more than 1,200 receiving yards, 80 touchdowns, and broke 11 Clemson University school records. He is one of four true freshmen to be nominated as an AP first-team All-American, entering the ranks of greats like Herschel Walker and Adrian Peterson.
He let his numbers speak for themselves. By the end of his third year at Clemson, he entered the 2014 NFL draft.
Six years ago, on October 26, Sammy and the rest of the Buffalo Bills headed down to the Meadowlands to face the New York Jets.
It was Sammy’s rookie year.
The Bills were deep in the Jets’ red zone. Watkins, virtually uncovered, hit a streak route, and he was off. Then, quickly showing off his 4.43 speed, he blew past the corner and the safety.
Now, there are a ton of examples of plays like this one. Sports fans might immediately think of DeSean Jackson, Michael Ruffion, or Leon Lett. But Watkins, thinking it’s just him and the endzone, puts his hand up on the 15 yard-line. Pointing at either some Bills fans who made it to the game or the football gods. Taunting his triumph. Only to be tackled at the 5-yard line. Literally feet away from what would have been an easy touchdown.
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Holmes always had a few tricks up her sleeve.
She always seemed to think she was the smartest person in the room. Business Insider claims that “Holmes took investors’ money on the condition that she wouldn’t have to reveal how Theranos’ technology worked… That obsession with secrecy extended to every aspect of Theranos.”
A lead scientist even warned her that the tests weren’t ready for public release.
Still, Elizabeth’s eyes were always on the prize. Fending off attempts to be removed as head Chief to bring fame to the Theranos name. Consequently, she also caught some unwanted attention.
By Autumn of 2015, the FDA and the SEC started investigating the firm’s tactics. First, claiming to find “major inaccuracies” in her test results. From here, Holmes took a major fall from grace. In 2018, Holmes and her right-hand man at the time were charged with nine counts of wire fraud, two counts of conspiracy to commit wire fraud, and had to return 18.9 million shares of Theranos stock.
Today, Holmes could face up to 20 years in prison and a requirement to pay restitution to victims.
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And as for King Charles….
During his rule, Charles constantly disagreed with his parliament. He didn’t listen to his aides or advisors about how England should be governed and the consequences of the endless wars. Eventually, he severed ties, believing he could rule England without a parliament.
By 1644, Charles had met his match: Oliver Cromwell. Cromwell was a military genius who presided over the Parliamentarian army, resulting in “the bloodiest war ever fought on English soil.” So, as you might have suspected, he lost control of his finances, his advisors, and all of the people of England. By 1646, Charles was defeated and later imprisoned by Cromwell.
Ultimately, Charles’ story ended with him being beheaded.
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Some people are born into it. Others stumble upon it. The rest of us need to work to create wealth ourselves. But our decisions, and more importantly, our reactions, have a butterfly effect on what our story becomes. Blair duQuesnay highlighted investing risks ideally, illustrating how some choices are tougher to quantify because their results don’t show up immediately.
Of course, yes, these are all excessive examples of one’s failure to maintain what they had, but it’s important to recognize here that greed and overconfidence are two very dangerous possessions of the investor.
Like Charles, like Elizabeth, or even with the small stakes of Sammy Watkins, greed and overconfidence can take over and squander everything you worked so hard to obtain.
Overconfidence is the tendency to overestimate our own abilities. Believing you can outsmart everyone else because you can act faster, feel you have better insight, or because you’ve done it before. Assuming it will all work out because … “c’mon. It’s me.” I’ve seen this so many times with new investors who got “interested” in investing because of the meme stock craze. Only to learn that investing isn’t as easy as buying a few shares of companies or coins you read up on.
I nodded when Morgan Housel said, “The worst financial decisions happen when people risk what they need in order to gain something they merely want.”
During bull market runs, we often overestimate our own strength. Michael Batnick reminds us to think back in time, saying, “in bull markets, we tend to overestimate our true tolerance for enduring discomfort.”
However, during bear markets, overconfidence looks like believing you can spare yourself from the waves of the red sea, hide out in cash and get back into the market at the perfect time. The odds of you being frozen to death by the volatility only to never return to the sea are higher than you may believe. I’ve heard stories of people who missed out on at least 5 years of market returns because they knew when to jump ship but not when to get back on board. For some of us, the best move is to just go below deck and ride out the rough waters. Quietly reminding ourselves, this too shall pass.
Overconfidence is only the key that turns the lock. The subtle flirtation of “your hopes and dreams” scribed on the door’s surface. One hand is on the key while the other is on the nob, opening to land only found behind your eyes.
Greed is the final act. It pushes the door open only to reveal that you were probably better off just lusting over such easily obtained riches.
Again, to quote Morgan, “most people can afford to not be a great investor but they can’t afford to be a bad one.”
