Elisha Perkins was born in 1741 in Connecticut. Having learned the art and science of medicine from his well-respected father, he became a physician himself, and even served in the Continental Army during the American Revolution as a surgeon. He was there during the Battle of Bunker Hill and the Siege of Boston, assisting the wounded. The man was a regular war hero.
After the war he began experimenting, and found something strange:
While performing a surgical operation he noted the contraction of a muscle whenever the point of a metallic instrument came in contact with it. This led him to try whether other materials, like wood, would occasion the same contraction of the muscle; the result was in every instance negative. He, therefore, decided that it was the contact with metal that caused the contraction of the muscle. About the same time he found that in some cases when a knife was used to separate the gum from a tooth, previous to extraction, the pain was relieved. He also observed that temporary easement of pain was occasioned by applying metallic instruments to inflamed and painful tumors before making an incision. This led him to experiment with instruments made of various metals in order to find which, either singularly or in combination, gave the best result; he finally discovered a combination which would serve his purpose. From this he made two instruments, and the results of their application exceeded his ardent expectations.
He had invented the “Perkins Patent Tractors,” a scary looking metal prod he would use to cure a number of ailments like inflammation, rheumatoidism, headache, etc.
He took out a patent for his new invention and started making them himself. The Connecticut Medical Society (the same organization his father founded) kicked him out for making claims he couldn’t prove. But like any good entrepreneur, that didn’t stop him. He just moved to a different city! He moved to the city of brotherly love and the birthplace of a new nation: Philadelphia.
He found much more success convincing the Phildelphians to buy and use his product (no one said they were smart). Hospitals and infirmaries started to use them. One even purchased the patent rights to make their own.
It just so happened he was there while Congress was in session, and some of them were duped as well. Even President George Washington and Chief Justice Oliver Ellsworth bought their own set of “Perkins Tractors.”
He began selling them overseas to England and Denmark and was an overnight success.
Unfortunately, he tried to expand into cures for yellow fever. He took his next invention, an experimental tonic to cure yellow fevet, to an outbreak in New York City. Turns out it didn’t work. He eventually contracted the disease and died 4 days later.
But at least his invention lived on… sort of.
You see a short time after he died, a man by the name of Jon Haygarth started to investigate this new invention. He was skeptical they actually worked. So he made wooden ones himself to use on patients, and found they had the same effect.
The whole effect undoubtly depends on the impression which can be made by the patient’s Imagination.
- John Haygarth
He even wrote a book about it: On the Imagination as a Cause & as a Cure of Disorders of the Body, which was the first to explain the placebo effect as a medical condition.
Haygarth found something very important:
The story you tell is often just as important as the cure.
This is the “secret ingredient” which makes the placebo effect so powerful.
The placebo effect can be harmful to your investing career, as Joe Wiggens from Behavioral Investment writes:
The definition of the ‘placebo effect’ from Google is as follows:
“A beneficial effect produced by a placebo drug or treatment, which cannot be attributed to the properties of the placebo itself, and must therefore be due to the patient’s belief in that treatment”.
We can reframe this slightly and create an ‘investment placebo’:
“A beneficial effect felt by an investor by a certain investment activity, which is unlikely to be attributed to the properties of the action itself, and must therefore be due the investor’s belief in that activity”.
What kind of activities might be captured by the above definition (not a definitive list):
– Short-term trading / market timing.
– Trading on macro-economic news.
– Performance chasing in active mutual funds.
This goes along with the old Charlie Munger “Don’t just do something, stand there!” Doing something feels great, like you are somewhat in control, but the truth is that a market made up of millions of algorithms, various objectives, and emotional monkeys with keyboards are in control, not you.
But don’t worry, I think I have the cure for this.
No needles required.
It’s a different type of placebo.
The story you tell is often as important as the cure, so you just have to change the narrative. Now, repeat after me:
I am a dumbass.
Good job! Let’s try that again:
I am a dumbass.
Feel more humble and better already? Great! Let’s keep going:
I need to automate my decision making process.
I know I want to buy cool stuff now, but I also need to save and invest for the future.
I reject FOMO and take pride in missing out (PIMO) of things I don’t understand.
I invest for the next decade, not the next few months.
I need to diversify my wealth to protect what I have. I need to make sure I’ll be okay.
I am a professional investor, and this is how I do it. This is who I am.
I hope that helps. You’ll get my check in the mail, I’m not covered by insurance.
One can struggle all day with what strategy to use, but in the end it's just about getting the simple things right. If you don’t like the way you are investing now, try changing the narrative. The “Placebo Investment Strategy” may be right for you.
Maybe I’ll call them “Charlie’s Vampire Stakes?”
In the same way your body will take care of itself, your investments will too.
Trust the process, and “Don’t just do something, stand there!”
Thanks for reading.
> I need to automate my decision making process.
For advice learning purposes, when is the "automation" correct or aptly applied? https://luttig.substack.com/p/timeful-advice https://hardfork.substack.com/p/why-most-founders-dont-take-good
Love these. 🔥🔥🔥