Drop your ego or it will drop you

Admitting your mistakes is hard when your ego is inflated

Ignorance + Ignorance about your Ignorance = A recipe for overconfidence

The field of professional investing has taught me one thing—if you’re not willing to change your mind over time, the markets will humble you.

If I’m tied to my view that a certain stock or fund will do well just because I spent months doing ‘research’ on it, I need to get past that and admit—time spent does not equal outcome earned.

This comes down to EGO.

Even if you see yourself as a soft-hearted person who means well, if you're unwilling to change your mind, it's your ego—subconsciously holding you back.

This is a phenomenon I have learned over time through my professional field of investing, but I have found it to be true across all aspects of my life, including friendships and relationships.

Are you willing to drop your ego and admit your mistakes? If not, consider yourself doomed—along with the people around you.

This is also due to the sunk cost fallacy—the mental trap that makes it hard to let go of things we’ve spent a lot of time on.

That could be investing in a stock, working on a project, staying in a relationship, or any other commitment we’ve gone deep into but need to walk away from.

We have a natural tendency to hold on to things we’ve invested too much time or money in, fearing the uncertainty that comes with letting go.

The same sneaky fallacy goes by another name—the Ikea effect. You know that feeling when you assemble an Ikea set from scratch? Suddenly, it’s the most valuable thing in your life! But it’s not just about furniture—it’s about the time and effort you’ve invested.

“I drove to Ikea, bought it, hauled it home, and assembled it.” Now I’m emotionally attached, and letting go feels impossible.

This phenomenon extends far beyond flat-packed furniture. It’s why we struggle to cut ties with bad investments, failing projects, lifelong eating habits, or even toxic relationships. We’ve put time into them, so they must be worth it, right? But recognizing when to walk away can be the real key to success.

‘If you never contradict yourself, you're holding yourself from a limiting belief, and it's holding you back from going to the next level.’

-Chris Williamson

Senior corporate leaders often suffer the most from this. If they change views they once shared publicly, they fear the backlash that will follow.

However, over the long term:

The cost of backlash < The cost of not admitting our mistake.

In the short term, admitting a mistake can seem costly but in the long run it is worth the cost.

People hate hypocrisy—if you say one thing and do something else.

However, sadly, in investing, there are times when we have to turn hypocritical to save ourselves.

"You once said this, but now you're saying something else", it’s like being half a step away from being called a liar.

This is the reason why most people will avoid admitting a mistake and live with the cost.

I used investing as an example, but it applies to all areas of life.

We want others to admit when they’re wrong—but we rarely do it ourselves.

There is a great story by Admiral Stockdale about how facing brutal facts is necessary for life so as not to fool ourselves.

It is called the Stockdale Paradox.

The Stockdale Paradox is named after Admiral James Stockdale, who was a prisoner of war in the infamous "Hanoi Hilton" during the Vietnam War from 1965 to 1972. Shot down and captured, Stockdale was the highest-ranking officer in the camp. His survival depended on the resilience of his mind, as the prisoners had little control over their bodies or their release dates—those decisions were in the hands of the guards.

After his release, Stockdale was asked how he managed to endure such a harsh environment. He explained that it wasn't the optimists who survived. Those who constantly believed they would be released by Christmas often suffered the most and many died when their expectations weren't met.

Stockdale emphasized that survival required balancing hope with clear-eyed realism.

Recognizing the brutal reality of their situation while maintaining hope for the future was crucial for enduring the prolonged hardship of captivity

And Christmas would come, and Christmas would go. The prisoners would ask:

‘What If we are out by Easter’

Easter would come, and Easter would go, they were still in prison.

‘What If we are out by Thanksgiving’

And then Thanksgiving, and then it would be Christmas again. And they died of a broken heart.’

Stockdale dropped his ego and did not let it cloud his judgment. That’s not to say he wasn’t a positive man.

Warren Buffet, the most successful investor of the modern age, is a shining example of learning to admit one’s mistakes early and being willing to accept change when needed.

He used to be a proponent of a certain style of investing till Charlie Munger, his longtime partner, convinced him to move away from the "cigar-butt" style of investing—a strategy Buffett had originally adopted from Benjamin Graham and which had seen success in his early days.

Buffett was open minded with Munger to accept his shortcomings and I would argue that this even ensured that they developed a healthier relationship.

Buffett focused on buying deeply undervalued companies (often struggling businesses) at dirt-cheap prices, with the hope of squeezing out a little remaining value—like picking up a discarded cigar with a "free puff" left in it. Buffett successfully used this method in his early years, finding companies trading below their liquidation value.

Munger, however, believed that buying great businesses at fair prices was far superior to buying bad businesses at cheap prices. He argued that high-quality companies with strong competitive advantages ("moats") and solid management would compound wealth more effectively over time.

Over time, Buffett acknowledged that Munger was right. Instead of just looking for statistical bargains, he started focusing on businesses with durable competitive advantages—leading to investments in companies like Coca-Cola, See’s Candies, and American Express.

Buffett himself admitted this shift, saying:
"Charlie shoved me in the direction of looking for wonderful businesses instead of just buying bargains."

This evolution in investing philosophy ultimately shaped Berkshire Hathaway’s long-term success.

He even used the word “mistakes” or “errors” 16 times in his letters during the 2019–2023 period.

In his 2024 letter to investors, he used the word “mistakes” 13 times.

He runs a publicly listed company where investors could tear him apart for this—but they haven’t, because they know he has embraced a mindset of change and today investors reward this behaviour. Buffett must have been well aware of the the backlash and cost formula which I mentioned in this piece.

Conclusion

People often assume that when they admit they are wrong, others will think of them as idiots, but that’s not usually the case.

Admitting we are wrong and moving on is something I personally respect a person more for.

Human beings are not perfect. Our excellence comes from continuously moving past our mistakes, being self-aware, and acknowledging them.

Relationships die when one party does not own up to their mistakes.

Relevant Reads from my blog:

1. If Only

2. Poha Analysis

3. Opportunity Costs

Order my book today, The Health and Wealth Paradox