After the heavy-duty debate on gold and the emotion that it triggered, I think it’s appropriate to talk about this…

It’s not something that a lot of people realise, but the road to wealth and financial security often demands a high-level of emotional intelligence.

Not always, of course. A lot of people make it into the upper echelons of wealth-dom without ever tuning into their own feelings. But for the kind of work that I do, and the kind of help that I offer people, a bit of emotional intelligence is essential.

For example, how do you feel about Paris Hilton?

When you think about all of her ‘obscene’ wealth – the cars, the jewellery, the Hollywood parties… when you remember that she’s never done a real day’s work in her life… when you realise that she commands more media attention than the Dalai Lama, but has less to contribute than a telletubby…

How do you feel about that?

If you’re like a lot of people I know, the emotional flavour tends to a sort of ‘condescending amusement.’

It’s a seductive emotional state. It makes you feel good. “I may not have a lot of respect, but at least I’m not that much of idiot. I may not have a lot of success, but at least I know the value of a hard day’s work. Maybe no-one cares about what I think, but at least I have opinions more sophisticated than a recipe for chocolate crackle.”

We live in an age where we are fully encouraged to give the dogs of judgement completely free rein. It’s the age of reality television (though I don’t know how much ‘reality’ there is in throwing a bunch of strangers into a completely contrived, studio-based situation…) But the primary commodity that reality television sells is ‘recreational judgement’.

We’re encouraged to sit around a bowl of pop-corn and have a good ‘ol judge.

“O.M.G she is such an idiot!”

“I can’t believe he just said that!”

“What is she doing? Who told her she could sing?”

And in case we’re missing the cue to flex our judgement muscles, put three authoritative ‘judges’ in some massive over-sized chairs, just to lead us through it.

(And then at the end, throw in some feel good, rags to riches, story of success we can all rally around and maintain the internal narrative that we are essential supportive and loving people – not completely lost to the demons of judgement and spite.)

But there’s a real danger in spending too long in this kind of space.

This is the lesson of ‘neuro-plasticity’. The more we practice something, the better we get at it – in all aspects of our life.

So if we spend a lot of time flexing our judgement muscles, they’ll get bigger. We’ll become judgment machines.

There’s a terrible danger in this, and I reckon society is completely blind to it.

Because the same muscles (neural pathways) we use to judge others, are exactly the same muscles we use to judge ourselves.

And so the more critical we become of others, the more critical we become of ourselves.

“judge not, lest ye be judged.”

And hating yourself is the surest path to unhappiness.

And the rub is that the more critical we are of ourselves, the more likely we are to being seduced by the recreational judgement of others. Paris Hilton is more of an idiot than me. That makes me feel good (well, less bad).

But it’s total mental junkfood, in that leaves you worse off in the long run. Because with the same thought that you’re judging Paris Hilton, you reaffirming the statement that you are also an idiot AND you’re building up your judgement muscles.

Don’t do it to yourself.

It’s a road to damaged and broken self-esteem. And it scares me that this is where we’re going as a society.

If there was a petition to ban reality (or recreational judgment) TV, I’d be the first to sign.

But I’m not in the business of lecturing psychology or social engineering. I’m in the business of helping my friends (and I consider every client a friend) find the road to financial security and wealth.

(And my guess is that you’re here for wealth tips, not amateur arm-chair psychology.)

So let me say then that unchecked judgement will become a major barrier to achieving the wealth you’re after, if you’re not careful.

Why?

Because why are you really judging Paris? Do you hate people less intelligent or less educated than yourself? No, my bet is you generally have compassion for those less fortunate than yourself in the brainy stakes.

Or do you hate people who don’t work? (hang on, aren’t you here because you want to spend less time working for the man, and more time hanging with friends and family and doing what you want?)

Or do you hate people who are wealthy and successful? But again, isn’t that why you read these posts. (I’m sure it’s not for the dazzling writing or even the technically correct use of grammar and punctuation.)

Even if it’s only at a mild and modest level, can you see what happens if we set up that kind of contradiction within ourselves? If we aspire to wealth and success, but freely judge those who are wealthy and successful?

We are asking ourselves to become the kind of person we don’t like.

Why would we do that? We beat ourselves up enough already. Why would we want to take more of that kind of punishment on?

And so a subtle level (even a vibrational level if you want to get all new-agey about it) we’re creating a resistance to exactly the kind of story we’re trying to call down for ourselves.

And so we won’t call down the opportunities we need, or if they do come, we’ll be unable to act.

No, we have to be careful. We need to be fully at peace with the journey we’re asking life to take us on. We need to feel it out, and feel joyful and expansive about it.

It takes work. It takes emotional intelligence. And it takes powerful discernment.

But not judgment. Leave all that judgement behind. It’s not yours.

Travel light and quickly, and with a joyous song in your heart.

And the road will come easy.

Imagine I offered you a bet.

Let’s say I’m an eccentric millionaire (not such a stretch). I’m going to toss a coin. If it comes up heads, I pay you $7000. If it comes up tails, you pay me $4000.

Would you take it?

Would the prospect of winning 7 grand of my money be worth the prospect of losing 4 grand of your own money, when both have an equal chance of happening?

Would you do it?

Now, if you’re like most people, this bet simply just isn’t worth it.

I’m not saying ‘like most people’ because I’ve actually been out there roaming the streets trying to play odd gambles with strangers, like some cross between Willy Wonka and Donald Trump. Psychologists and economists have studied gambles like these (mostly in the abstract), and found that typically, people just don’t go for bets like these.

But why exactly don’t we like this bet? The ‘expected value of the bet is:

(50% x $7000)
+
(50% x -$4000)
= $1500

That is, it’s positive. The expected return of this gamble is positive. In economic theory, you’re taught that people like gambles like these. From a purely economic perspective, it’s a good bet.

But again, economics has given us something that is true in theory, but wrong in practice. So it’s over to the psychologists to come up with an explanation.

There’s a few related constructs that help explain this future of the mind, but central among them is a concept called ‘loss aversion’.

Studies show that losses loom much larger in our mental view of the world than similar sized gains.

Know the saying ‘a bird in the hand is worth two in the bush’? We value things we have much more (2x more according to that proverb) than things we don’t have, but could have.

And we’re hard-wired to hate losing things.

This can create some interesting quirks. What if I put on my Willy Wonka hat again and offered you a gamble that offered a 10% chance of winning $95, and a 90% chance to lose $5.

Would you take it?

What if I offered you a lottery ticket that had a 10% chance of winning $100, and a 90% chance of winning nothing. The ticket cost $5.

Would you buy it?

If you’re like most people (in the experiments) you’re much more likely to go for the second bet than the first.

But check the maths again. Those two gambles are exactly the same. They’re just framed in different ways.

In one, there’s the prospect of losing $5. In the other, there no prospect of losing anything, but there is a small expense.

There’s no practical difference, but when the mind is distracted from the prospect of a loss, it takes a more objective view of the bet.

As humans, we just don’t like losing. And we’ll go out of our way (even avoiding favourable gambles) to avoid it. It’s a principal called ‘loss-aversion’ in economics, and if you look for it, you’ll see it everywhere… (insurance, anyone?)

But losses are also a relative concept. If we were talking 7 cents rather than 7 grand, you’d probably feel differently about the bet (though perhaps not about the weird Willy Wonka dude hassling you on the street.)

Or what if I was offering the bet to poor little orphan Annie? What would you recommend? What about if I was offering the bet to David Koch? What then? The perceived weight of the losses changes, and with it, so does the attractiveness of the bet.

Now I’m not saying that there’s anything wrong with being loss adverse. In fact it seems entirely rational, and if you weren’t loss adverse there might be something wrong with your brain.

But as investors, we need to know that our brains are hardwired this way. And we need to be on our guard in case overly focussing on the losses blinds us to some attractive bets.

Now, let’s come back to our bet for 7 and 4 grand. What if I said I was going to run the bet 100 times? Flip the coin 100 times. Then what would you say?

Suddenly this border-line dodgy bet seems like a great deal. Your mind has probably already intuited out the kind of gain you could expect.

100 coin tosses is going to come down somewhere pretty close to 50 heads, 50 tails. The expected value is now $150,000. You’ll definitely lose individual tosses from time to time, but there is a very small chance that you’ll actually lose money over all.

It’s a no brainier. Of course you’ll take the bet. Thanks Willy Wonka dude.

But the odds of any individual bet haven’t changed. Only the number of times the bet is taken.

In my experience, successful investors can do this. They’re able to put their bets in the context of a long series of bets, and this makes them more likely to take the opportunities that arise.

Think about it this way. What kind of returns would you need from an individual property investment? What about if you imagine a lifetime of property investing, maybe over 100 properties? What kind of odds would you need then?

See how it changes?

Of course it’s easier once you actually have 100 properties under your belt. But there’s nothing to stop you thinking like a pro, straight from the get go.

That’s what I do. I approach every investment, not just on it’s individual merits, but as if it were just one of a life times worth of investments (which I know it is).

I know I’m not going to back a golden winner with every investment. But I know if I get a good system in place, over the long run, I’m practically guaranteed to come out way, way ahead.

And certainly more than if my loss-adverse brain kept me on the sidelines.

Yep, that’s my motto: Party like you’ll die tomorrow. Invest like you’ll live forever.

You can quote me on it.