Warren Buffett Says 'You Can't Stand To See Your Neighbor Get Rich Knowing You're Smarter' – And That's When Greed Leads To 'Idiotic' Choices

Warren Buffett's timeless wisdom resonates now more than ever: "You can’t stand to see your neighbor get rich knowing you’re smarter." 

This quote, which Buffett mentioned years ago in an interview with Charlie Rose, captures a very human experience – FOMO, or the fear of missing out. That nagging feeling creeps in when you see others profiting from investments while sitting on the sidelines. But as Buffett warns, this normal human fear can lead to foolish financial decisions. 

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He elaborated to Rose, "You can't stand to see your neighbor getting rich. You know you're smarter than he is, but he's doing all these [crazy] things and getting rich … so pretty soon you start doing it."

Watching our neighbors or friends cash in on the latest hot stock or cryptocurrency can trigger a whirlwind of emotions: envy, greed, and even a sense of urgency. Suddenly, the rational investors we thought we start feeling the pressure to jump into the fray, often without fully understanding the risks involved. In the interview, Buffett summed it up: "People don't get smarter about things that get as basic as greed."

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Buffett describes this behavior as “contagious” and a “permanent part of the system.” It drives market bubbles and leads otherwise savvy individuals to make hasty investments based solely on rising prices rather than sound fundamentals. The allure of quick riches can be intoxicating, but it often clouds judgment and leads to regrettable choices.

There is a natural progression to how good ideas go wrong, referred to as the "three I's." First are the innovators, who see opportunities others miss. Next are the imitators, who copy the innovators. Finally, there are the idiots whose greed undoes the innovations they aim to exploit for profit.

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Andrew Oswald, a professor of economics at the University of Warwick, explained in the Harvard Business Review, "The curse of humanity is that people feel compelled to look over their shoulders." Values are about always knowing the difference between what's smart and just convenient. This requires discipline and distinguishing between genuine innovation and mindless imitation. 

But what does Buffett suggest to overcome this basic instinct and the following moves? Don't let FOMO dictate your financial strategy. Buffett advocates for a disciplined, long-term approach to investing. "If you aren't willing to own a stock for 10 years, don't even think about owning it for 10 minutes," he famously said. This mindset encourages investors to focus on the intrinsic value of their investments rather than chasing trends or reacting to market noise.

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Buffett’s steady, value-based philosophy might seem outdated in a world filled with get-rich-quick schemes and the allure of instant wealth. Yet, his success speaks volumes. He has built one of the most successful investment careers in history by resisting the urge to follow the crowd and sticking to his principles.

So, take a step back the next time you feel the itch to jump into an investment just because your neighbor is cashing in. Remember Buffett's wisdom: the smartest move might be to hold your ground and stick to your long-term strategy. After all, true wealth is built over time, not overnight.

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