Bob Pisani: My obsession with a Black Sabbath poster showed how irrational we can be when investing

(Below is an excerpt from Bob Pisani's caller publication "Shut Up & Keep Talking: Lessons connected Life and Investing from the Floor of the New York Stock Exchange.")

If you deliberation knowing thing astir behavioral economics prevents you from doing anserine things, fto maine archer you astir the Black Sabbath poster I bought.

I person a hobby: I cod 1960s stone posters.

I know, it's a small strange, but it's fun. It's astir the aureate property of rock: Jimi Hendrix, the Doors, Cream, Grateful Dead, Jefferson Airplane. The benignant — usually referred to arsenic "psychedelia" — had a tremendous interaction connected the ocular arts of the 1960s, and continues to person an interaction today. The artists who created this benignant — Wes Wilson, Rick Griffin, Stanley Mouse, Alton Kelley, Lee Conklin, Randy Tuten, David Singer, Victor Moscoso, and Bonnie MacLean — successful my opinion, are the Toulouse-Lautrecs of their day.

Most of these posters were fixed retired astatine concerts astatine the Fillmore successful San Francisco oregon a fewer different venues, past were rapidly hung connected walls, torn up, and thrown away. There's not a batch of copies of the aboriginal posters from the dawn of psychedelia (1966-1968), and a tiny assemblage of collectors that commercialized these posters has grown up successful the past 40 years.

During the pandemic, I displayed a fewer of the posters I had framed connected my partition down maine erstwhile I was broadcasting.

They were an instant hit. My coolness origin connected societal media went done the roof. Room Rater — a Twitter tract that rated the rooms of reporters that were broadcasting from their homes and apartments —gave maine a 9 retired of 10, past upped it to 10 retired of 10.

Who knew determination were truthful galore Deadheads and aged hippies watching CNBC?

How I astir mislaid my caput bidding connected a anserine Black Sabbath poster

One time I was monitoring an online auction of stone posters. A 1976 Black Sabbath poster came up for sale. I was not a Black Sabbath instrumentality successful the 1970s. I was into Led Zeppelin and the Who, but this was a chill poster, with Ozzie Osbourne waving his hands successful the air.

The opening bid was $200. On a lark, I bid $400. I figured that $400-$500 was a just terms and the auction would rapidly beryllium over.

Immediately, idiosyncratic counterbid $500.

Hm. I don't truly privation this poster, but I'm intrigued. Who wants it?

I bid $600. Immediately, there's a counterbid for $700.

Hm. I bid again. Another counterbid.

In 2 minutes, we're astatine $1,000.

Now I'm getting annoyed. Who the hellhole wants this poster truthful badly? It's not similar Black Sabbath has an aggravated cult of collectors, similar Zeppelin oregon the Velvet Underground.

At slightest I didn't deliberation so.

I bid again. Another counterbid, immediately.

Two minutes later, we are astatine $2,000.

Now I'm yelling astatine my computer. I don't privation this goddamn poster.

A infinitesimal oregon truthful later, we are astatine $2,500, past $3,000.

Now I don't attraction what the hellhole the terms is. I privation to find retired who this idiosyncratic is, get a meeting, rotation up the poster and unit it down his oregon her throat.

I privation to marque them devour this goddamn poster.

A fewer minutes later, I won the poster, astatine $3,499, positive a 10 percent buyer's fee.

Who's the idiot here?

The adjacent day, I did thing I astir ne'er do. I called the idiosyncratic who ran the auction, a precise respected trader who specialized successful stone posters.

It's not communal to inquire who the competing bidders are astatine auctions, but the auction was implicit and I had to know. Who was this person? Was I bidding against Ozzie Osbourne himself?

Who the hellhole was consenting to walk $3,500 for a goddamn Black Sabbath poster? Who is this idiot, I demanded to know?

The trader said, "I tin archer you who the idiot was, Bob. It was you. You're the idiot who bought it."

And helium was right.

What happened to me?

Collectors volition archer you that to beryllium a palmy semipermanent collector of anything, you indispensable beryllium disciplined. You indispensable cognize what you are consenting to wage for something, and not spell implicit that price. You cannot beryllium carried distant by the emotion of an auction. You indispensable beryllium consenting to locomotion away.

I person walked distant from astir auctions a loser, due to the fact that I wasn't consenting to wage much than I thought a poster (or a comic book, different obsession from decades ago) was worth.

What did I deliberation that poster was worth? $400-$500.

How did I cognize that? I had respective decades of acquisition bidding connected stone posters, and based connected what I had seen I thought that was a tenable price.

But it was each a guess, arsenic it is with each collectibles. With stocks, astatine slightest you person the quality of trying to fig retired what the "intrinsic value" of the banal mightiness be, based connected what benignant of dividend it pays, and the contiguous worth of a aboriginal watercourse of currency travel that mightiness crook into earnings.

This is known arsenic "fundamental analysis" and it is the ground for astir semipermanent banal investing.

But there's nary of that erstwhile it comes to posters, oregon immoderate different benignant of collectible.

A stone poster doesn't bash anything. It doesn't wage a dividend, oregon supply a aboriginal currency travel you tin effort to discount into the present. It conscionable sits there. Same communicative with gold, and with Bitcoin arsenic well.

What's this poster worth? It's worthy immoderate anyone is consenting to wage for it astatine that moment. It doesn't person an intrinsic value, but it does person a price.

And erstwhile you person 2 bidders who suddenly, for immoderate reason, determine they are price-insensitive, ticker out. The terms tin get anserine fast.

Which is precisely what happened. I bid $400 and ended up with a $3,500 poster of Ozzie Osbourne staring maine successful the face.

With that damn Black Sabbath poster, I violated each the rules. I mislaid it. Something snapped.

Why did I suffer it?

I consulted Dr. Brad Klontz, a Certified Financial Planner, scientist and a subordinate of the CNBC Financial Wellness Council. He's an adept successful fiscal psychology, behavioral finance, and fiscal planning, and he's writer of respective books, including Money Mammoth: Harness the Power of Financial Psychology to Evolve Your Money Mindset, Avoid Extinction, and Crush Your Financial Goals.

Brad showed maine respective ways my reasoning had been skewed:

Competition: Cooperation is much communal successful relationships and contention is much communal with unrelated individuals. Competition increases erstwhile proviso is debased and request is high. It's imaginable that the anonymity of my rival made maine much competitive.

The science of scarcity: When we judge that we deficiency thing we go little rational and are much prone to engaging successful self-defeating behaviors to effort to get it.

The Endowment Effect: We person a inclination to overvalue what we already possess. The grade to which I fantasized astir already having that poster connected my partition would person accrued the terms I was consenting to wage for it.

Social Facilitation: Being successful the beingness of others changes our behavior. Sometimes this improves our show and astatine different times it tin compromise our committedness to instrumentality to our plans, including engaging successful much risky behaviors than we would person done if we were alone.

There are different explanations, including 1 offered indirectly by the dean of behavioral economists, Daniel Kahneman. In Your Money and Your Brain: How the New Science of Neuroeconomics Can Help Make You Rich, Jason Zweig quotes Kahneman arsenic saying, "Financial decision-making is not needfully astir making money. It's besides astir intangible motives similar avoiding regret oregon achieving pride."

Thank God I'm truthful rational (not)

Those were surely factors lurking successful the backmost of my mind. I didn't privation to miss retired connected acquiring a uncommon poster (I had ne'er seen it before), and I astir apt wanted the bragging rights to owning it.

All these explanations are feasible, but I inactive retrieve being annoyed that anyone was consenting to wage truthful overmuch for the damn poster. It was irrational!

I framed it, which outgo maine different $500. I had to drastically curtail my spending for a fewer months conscionable to wage it off. It hangs connected my surviving country wall, a reminder of my ain stupidity and biases.

It is simply a beauteous chill poster, though.

Bob Pisani is elder markets analogous for CNBC. He has spent the astir 3 decades reporting from the level of the New York Stock Exchange. In Shut Up and Keep Talking, Pisani shares stories astir what helium has learned astir beingness and investing.