Create Wealth Through Long-Term Investing and Short-Term Trading

Yang's Law ~ “Given two items A and B, of which you are an expert in A, and


little about B, you will always invest more in B than A.”

Confidence Transposition ~ “People who are experts in one area, assume

therefore they are experts in another.”

Background Blurb:

This law is one that I came up with after careful assessment of my own

personal life and the problems I faced in my life. It stems from the

observation that professionals, when they lose large amounts of money,

almost never do so in their own field of expertise. They instead,

invest more in areas they know very little about or are not in their field

or scope of expertise.

Most authors write from the vantage point of experience that they have

personally gleaned; and I am no exception. This has been a personal battle for

me, and one that I am happy to share in hopes that by doing so, others can avoid

the same mistakes I have made. The concept is simple to explain, but wrapped

wholly in strange psychology. From Yang's Law, stems a corollary that is almost

as profound, one that I aptly name Confidence Transposition. It is difficult to

explain one without explaining the other, so I have grouped them together in

hopes that it will increase your understand of them.

We shall start with the corollary first, and work our way to the law. Let's

take someone we all know, the basketball player Michael Jordon. A legend in his

own time, we may never see another basketball player like him ever again. Yet,

when Michael Jordon retired, he tried out for the baseball team. Why would

someone like Michael Jordon do something like that? The reason is, most believe

(and wrongly) that if they are experts or professionals in one area, then they

therefore can be experts in another area. This psychological conclusion, I have

coined as Confidence Transposition: “People who are experts in one area, assume

therefore they are experts in another.” This is why a large percentage of medical

doctors play the stock market (and lose). They believe and say often, “I can do

open heart surgery, how difficult can picking a few stocks be??” Consequently,

most doctors invest in the stock market, and lose. Now we have a chicken and

egg problem, leading us from the corollary to the law; while the doctor is an

expert at medical practices, he knows nothing about stocks and finance; yet when

it comes time to invest a large chunk of his money, HE WILL INVEST MORE IN

THE STOCK MARKET THAN IN HIS OWN PRACTICE. This is then crux of

Yang's Law: “Given two items A and B, of which you are an expert in A, and know

little about B, you will always invest more in B than A.”

I am not a psychologist nor do I play one on TV, but this sort of behavior is

unexplainable and yet happens all the time. This is the reason you hear doctors