## Friday, September 02, 2016

### Principle of Non-equality of Equal magnitude numbers

Hypothesis:

Equal numbers a and b of the same magnitude need not be equal
i.e 1+1 is not necessarily equal to 3-1, even though numerically they are both equal to 2.

Method of proof:

Proof A:

I have 3 million dollars, but I lost 1 million dollars, so I still have 2 million dollars. I might go jump down. If I have 1 million dollar and I made another million, I now have 2 million dollars, instead I jump for joy. The former makes me jump down, the latter makes me jump up, possibly with fist pumping and with occasional shouts of joy. Thus they are clearly different, even though it's the same.

Proof B:

I have 3 bad debts (all of equal amount), and I tried all ways to get rid of 1, so now I have 2 bad debts. I'm overjoyed. If instead I have 1 bad debt, and I incurred another one so that I now have a total of 2 bad debts, I'm overburdened with sadness. The former makes me overjoyed, the latter makes me chained in debts. Thus they are clearly different, even though it's the same.

Proof C:

I have 3 multibaggers in my stock investment. But one of them turned from multibagger to multibeggar and eventually goes to 0. I feel stupid and adopt the 'take profit is never wrong' principle. If instead I have 1 multibagger, and I held another investment until it too became a multibagger, such that in the former and the latter case, I earned the same amount of money, I will feel clever and adopt the 'investment is for the long term' principle. Both are the same result, yet they are different.

Conclusion:

Hence the principle of non-equality of equal magnitude number is verified.

Implication:

1. The journey to the result is as important as the result. If the final result is equal, and the journey to reach the result is the same, then it might be equal in all aspects. But I doubt the journey can be the same. Even if the journey is the same, the person might be different. Even if the person involved is the same, the mental state of the person might be different. Hence, it's safe to conclude that equal results need not be equal to the person carrying out the journey.

2. Aversion of loss is stronger than the greed for gain. If I managed to lose more, I will feel more sadness compared to the happiness I get from gaining more. Conversely, that should mean that if I manage to avoid losing, I should feel more happy than losing the opportunity for gains. This explains why when a counter I'm eyeing doubles in price, I can rationalise it off and say it's just not for me or I'm busy or at that point in time I act on the best of my knowledge. But if I managed to avoid buying a counter that halved in price, I shout HENG AH.

3. Comparing against another person is a very silly thing. You're 30 years old and I'm 30 years old. You have 100k but I only have 30k. So? You might have gone from 200k to 100k while I might have gone from 15k to 30k. Our journey is vastly different. Comparing against your past self might at least reduce the number of variables by one,

Createwealth8888 said...

Measuring the performance of end result or outcome is not same as stating the end result or outcome.

la papillion said...

Hi bro8888,

Well, this goes beyond measurement. This talks about the ups and downs of your portfolio leading to your results. The highs and lows on the way to your results will create a unique experience for the person reaching there. A single xirr or cagr will not reflect that, haha

Singapore Man of Leisure said...

LP,

At first glance of your headline the first thing that ran through my mind was,

"Run that by me again?"

LOL!

With trepidation, since I never took A. Math, I gave your post a try... Afraid it would contain mathematical formulas and equations :(

Aiyo! That's right up my alley lah!

Its grey grey voodoo Jedi mind stuffs ;)

Feel a lot better now.

Can go to work with a big grin :)

la papillion said...

Hi SMOL,

Haha, I apologise for the intimidating title :) I did it purposely to filter off non serious readers :) This is very much in line with one of the 3 M of investing - the mind part haha :)

Sillyinvestor said...

LP,

U evil. I saw your title and first paragraph, also stop Liao. Tell
Myself to read when I have more time to digest.

After the first paragraph, it is easily digestible. Lol

Nice. A great decoy and then the "climate"

I think everyone know what u are trying to say, but to each "cultivation" to reduce variables and be happy

Sillyinvestor said...

LP,

U evil. I saw your title and first paragraph, also stop Liao. Tell
Myself to read when I have more time to digest.

After the first paragraph, it is easily digestible. Lol

Nice. A great decoy and then the "climate"

I think everyone know what u are trying to say, but to each "cultivation" to reduce variables and be happy

Rolf Suey said...

Hi LP,

A perspective so balance and beautiful written. Like x 10!

la papillion said...

Hi SI,

Hahaha, so you managed to filter through :)

I thought what cultivation you're talking about...then I remember what subject you teach and convert accordingly lol

This is also not the first time I've talked about such issues. You can see this