Why Most of Your Investments Will Fail 5/6
The Psychology of Money, Part 5: Tails, You Win
My goal for this article is simple: to convince you to start investing a portion of your income, every month, for the next 20 years. We’ve spent enough time and money standing on the sidelines. It’s time to get in the game.
In the last part, we saw how Warren Buffett’s fortune was a testament to the power of compounding—of shutting up and waiting. But that raises a terrifying question: What about loss? What if I invest my money and it all disappears?
The hard truth is you will lose money. It is inevitable.
But the most important financial lesson you can learn is this: losing is not the same as failing. In fact, losing is a non-negotiable part of winning.
This is the fifth part of our deep dive into Morgan Housel’s The Psychology of Money. Today, we’re going to redefine our relationship with failure and learn the single most important strategy for long-term success: Tails, you win.
3 weekly insights, full archive access, and advanced frameworks. The annual plan is nearly cost-free
The Difference Between a Loss and a Failure
Imagine two brothers, Nasser and Aqeel, who each dream of building a business empire. Nasser wants to open a chain of cafes. Aqeel wants a chain of restaurants. They both start their first location, full of passion and hope.
Within a year, both businesses have failed. They’ve lost their money and closed their doors.
Is this a failure? The answer depends entirely on what happens next.
If you ask Nasser, he might say, “I’m done. The experience was a disaster, and I’m not willing to lose any more money. This dream isn’t for me.” At that moment, Nasser had officially failed. He has given up on the goal.
But if you ask Aqeel, he might say, “I lost money, but I learned. I learned about managing inventory, hiring staff, and marketing. The plan was good, but reality is messy. I’m going to take these lessons, save up, and try again—smarter this time.”
Can you call Aqeel a failure? Absolutely not. He is still on the path. His loss wasn’t a dead end; it was a tuition payment for a real-world education.
This is the critical distinction.
A loss is a single outcome, an event, a stumble on the path.
A failure is giving up on the path altogether.
Thomas Edison didn’t fail 1,000 times to make a lightbulb. He discovered 1,000 ways not to make one. Each loss was a step forward. Each loss was growth. This mindset is everything. You don’t need to win every time. You just need to win once, and that one win can pay for all the losses.
The Walt Disney Story: 400 Losses, One Win
Anyone who has built anything of value understands this. Consider Walt Disney.
By the mid-1930s, Disney had produced over 400 cartoons. The public loved them. But as a business, the studio was a disaster. Most of the films lost money, and the company was constantly on the verge of bankruptcy. They were racking up hundreds of small losses.
Then, in 1937, they released Snow White and the Seven Dwarfs.
In its first six months, the 83-minute film earned $8 million—more than all of their previous 400 films combined. That single win changed everything. It paid off all the company’s debts, funded a new state-of-the-art studio, and won an Academy Award, transforming Walt Disney from a well-known animator into a global icon.
The 400 losses weren’t failures. They were the necessary practices that made Snow White possible. The studio was learning with every mistake, refining its craft until it finally had a breakthrough.
This is how long-term investing works. You will have losses. Many of your bets will not pay off. But you don’t need every investment to be a winner. You just need a few big wins to cover all the losers and then some.
