Investing, Not Masochism
I ended yesterday by promising to tell you how to become an investor without becoming a masochist. And I will, but before I do, I am going to yield the floor…
The Milwaukee Bucks were the number one seed in the NBA Playoffs this year but got knocked out in the first round by the Miami Heat. After that defeat their star player Giannis Antetokounmpo faced the press and was asked if that made their season a failure. He was visibly frustrated when he responded (in a video that has since gone viral), “Michael Jordan played 15 years…won 6 championships. The other 9 years were failure?”
“It’s the wrong question,” he continued. “There’s no failure in sports. There’s good days and bad days…some days it’s your turn, some days it’s not your turn…it is steps to it.”
By “it,” he meant success.
Back to masochism…
My dad’s a scientist so compares a lot of things to real world laws. The law of conservation of energy states that energy cannot be created or destroyed, but can be changed from one form to another i.e., potential (the energy of an object due to its position) and kinetic (the energy of an object due to its motion). This is a very interesting way to think about the value of putting effort into a trade with nonlinear outcomes such as sports or investing.
I said yesterday that when it comes to becoming a successful investor, there will be many days where you make no visible progress towards achieving your goals. And that’s true. But if you have good habits, put in the effort, and get reps and feedback you are making progress, even if it’s not visible.
I’ve started calling these days “potential energy days.” In other words, these are days when the work you put in improves your position, even if it doesn’t manifest itself in motion. And recognizing that you are going to have a lot of those days and celebrate them too in addition to your visible successes is how you can become an investor without becoming a masochist.
— By Tim Hanson