As the second volume of The Last Lion winds down, but not before one more abortive attempt at peace.

At 7:30 P.M. a crowded House awaited the prime minister’s announcement. Parliament, like the British press and public, was ready for war. The secret conduct of foreign policy was past. The country knew of HMG’s commitment to Poland, knew how deeply the German army had penetrated the Polish defenses, knew England’s delay in declaring war was responsible for Luftwaffe supremacy in the skies over Poland, and was ready to come to her aid. [General Edward] Spears had never seen Parliament “so stirred, so profoundly moved…. The benches were packed. The unbearable suspense was about to be relieved. One and all were keyed up for the announcement that war had been declared.”

To Churchill there was “no doubt that the temper of the House was for war. I even deemed it more resolute and united than in the similar scene on August 2, 1914, in which I had also taken part.” As the prime minister rose another MP felt that “most [members of the House] were ready to show their intense relief that suspense was ended by cheering wildly.”

“But as we listened,” Spears wrote, “amazement turned to stupefaction, and stupefaction into exasperation.” Chamberlain was speaking, not of Nazi crimes, nor of suffering Poland, nor Britain’s honor, but of “further negotiations,” or rather of their possibility, since the German government had rejected HMG’s last such proposal. But, the prime minister said to the staring, straining, immobile House, that was not necessarily a reason for discouragement. The Führer of the Reich was a very busy man. It was not impossible that he was pondering the Italian government’s suggestion for a conference. Chamberlain affirmed HMG’s demand that German troops leave Poland but—despite the unanimous vote of his own cabinet, and his pledge to report it here—he mentioned no deadline for their departure. “If the German Government should agree to withdraw their forces, then His Majesty’s Government would be willing to regard the position as being the same as it was before the German forces crossed the Polish frontier.” Then, he said triumphantly, “the way would be open to discussion” between Poland and the Reich, in which case Britain would be willing “to be associated with such talks.”

He sat down. No one cheered. Instead, Hugh Dalton heard what he called “a terrific buzz.” Margesson signaled his whips to brace themselves for physical violence, and with reason. Duff Cooper and Amery, Dalton saw, were “red-faced and almost speechless with fury.” Cooper himself had “never felt so moved.” Spears saw the House “oozing hostility.” Two MPs actually vomited. Churchill, for once understating the hostility to Chamberlain merely noted that “the Prime Minister’s temporising statement was ill-received by the House,” but Amery wrote that Parliament “was aghast. For two whole days the wretched Poles had been bombed and massacred,” and here was the prime minister of Great Britain discussing how “Hitler should be invited to tell us whether he felt like relinquishing his prey! And then there were all these sheer irrelevancies about the terms of a hypothetical agreement between Germany and Poland.” Amery wondered whether Chamberlain’s “havering” was “the prelude to another Munich.” On that occasion, Parliament had given the prime minister a standing ovation, but “this time any similar announcement would have been met by a universal howl of execration.”

At last, the House of Commons and the British public must admit war is at hand, and yet Chamberlain could not say so. Beyond a very real hope for peace, I think he was unable to move on. If he admits Germany has forced war by invading Poland, is that admitting he was wrong in Munich? What about the rest of Appeasement?

It might at first seem strange to see a parallel between matters of state and hedge fund trading, but my mind was drawn back to the biggest lessons I took from my reading of What I Learned Losing a Million Dollars.

There are many different types of losses. You can lose your keys, a game or contest, money, your mind, esteem, self-control, your parents, a bet, a job, etc. However, all losses can be categorized either as (1) internal, such as self-control, esteem, love, your mind, or (2) external, such as a bet, a game or contest, money. External losses are objective, and internal losses are subjective. That is, an external loss is not open to subjective, individual interpretation; it is an objective fact. On the other hand, an internal loss is defined in terms of the individual (i.e., subject) experiencing it. In other words, a loss is objective when it is the same for me, you, and anyone else. The loss is subjective when it differs from one person to another, when it is entirely a personal experience.¹

Decision making is a process of reaching a conclusion after careful consideration; it is a judgment, a choice between alternatives when all the facts are not yet, and cannot yet, be known because they depend on events unfolding in the future. Therefore, decision making is not a choice between right and wrong. In 20/ 20 hindsight, decisions might be good or bad but not right or wrong.

…it is easy to equate losing money in the market with being wrong. In doing so, you take what had been a decision about money (external) and make it a matter of reputation and pride (internal). This is how your ego gets involved in the position. You begin to take the market personally, which takes the loss from being objective to being subjective. It is no longer a loss of money, but a personal loss to you (i.e., someone you knew was on the airplane that crashed). An example of personalizing market positions is people’s tendency to exit profitable positions and keep unprofitable positions. It’s as if profits and losses were a reflection of their intelligence or self-worth; if they take the loss it will make them feel stupid or wrong. They confuse net worth with self-worth.

I think politics are as rational as the market is efficient, which is to say emotion is tied up in far more decisions than is strictly prudent. As a consequence of people’s tendency to internalize an external decision, Jim Paul explains the only way to determine exit criteria is to do so before ever entering the market. Once a position is already held, it is too easy to seek to be “right,” rather than evaluating a decision as “good” or “bad.” It’s too easy to hold a bad position forever, awaiting a vindication that never comes. I don’t think it’s a stretch to apply this principle to politics too.