Jim Paul's meteoric rise took him from a small town in Northern Kentucky to governor of the Chicago Mercantile Exchange, yet he lost it all—his fortune, his reputation, and his job—in one fatal attack of excessive economic hubris. In this honest, frank analysis, Paul and Brendan Moynihan revisit the events that led to Paul's disastrous decision and examine the psychological factors behind bad financial practices in several economic sectors.
This book—winner of a 2014 Axiom Business Book award gold medal—begins with the unbroken string of successes that helped Paul achieve a jet-setting lifestyle and land a key spot with the Chicago Mercantile Exchange. It then describes the circumstances leading up to Paul's $1.6 million loss and the essential lessons he learned from it—primarily that, although there are as many ways to make money in the markets as there are people participating in them, all losses come from the same few sources.
Investors lose money in the markets either because of errors in their analysis or because of psychological barriers preventing the application of analysis. While all analytical methods have some validity and make allowances for instances in which they do not work, psychological factors can keep an investor in a losing position, causing him to abandon one method for another in order to rationalize the decisions already made. Paul and Moynihan's cautionary tale includes strategies for avoiding loss tied to a simple framework for understanding, accepting, and dodging the dangers of investing, trading, and speculating.
"Worthwhile reading for those who don't believe in the holy grail in the markets; a must-read for those who do." — Jack Schwager, author of Hedge Fund Market Wizards
"A novel approach aimed at pushing you inside your head and outside the losing habits most folks adopt right after multiple successes. A must-have for traders blessed with a string of hot trades." — Ken Fisher, FORBESFisher Investments
"At Ned Davis Research, we like to say that we are in the business of making mistakes and that the only difference between winners and losers is that winners make small mistakes and losers, big mistakes. This book does an excellent job in explaining in simple English the potential psychological 'flaws' that cause investors to make big mistakes." — Ned Davis, Ned Davis Research, Inc.
"One of the rare noncharlatanic books in finance." — Nassim Nicholas Taleb, from Antifragile: Things That Gain from Disorder
"Plenty of books recount past successes or focus on how to make money in the market, but what about keeping the money you already have? This may seem like a high-class problem, but it is a very real challenge for investors with substantial capital." — John Mihaljevic, Beyond Proxy
"[An] enlightening read." — Brenda Jubin, Investing.com
"The book points out very early that many successful investors have opposing styles and theories on how to make money, and that they can not all be right at the same time. The most important point to take from the book is how to avoid losing money..." — Steve Osbiston, Financial Times Advisor
"Seldom do we hear the message that the management of risk, not just the taking of risk, is at the heart of success in habitual entrepreneurs. Just as the professional athlete learns to play his or her game mentally before the actual contest, so the successful entrepreneur reduces the risk of the new challenge by planning before implementing." — Edward M. Moldt, Kelley School of Business, Indiana University, Bloomington
Preface to the Columbia Edition
Part I. Reminiscences of a Trader
1. From Hunger
2. To the Real World
3. Wood That I Would Trade
4. Spectacular Speculator
5. The Quest
Part II. Lessons Learned
6. The Psychological Dynamics of Loss
7. The Psychological Fallacies of Risk
8. The Psychological Crowd
Part III. Tying It All Together
Read an excerpt from What I Learned Losing a Million Dollars (to view in full screen, click on icon in bottom right-hand corner)