Winning by not losing
I have not been going through the best of health off late. Up until a week ago, I was flying high. Then I developed cold which led to slight fever for a couple of days and then back to just cold again — a pesky, annoying cold and persistent dry cough. As such, with winter knocking on the door, this kind of sickness is in the air — so why talk about it?
Well, last Sunday was meant to be the Marathon race for which I trained for 14 hard weeks. Those who run full marathons would know that training for a full marathon is a test of commitment, dedication and perseverance. It does take a big slice out of life. It was not an easy decision to not run the race. Not trusting my own ability to judge, I sought counsel from a couple of senior runners (they actually are a couple!). My decision to not run turned out to be a good thing because that day I ended up running some fever too. In the throes of this not so severe sickness, I went through a pessimistic streak. Perhaps hence, I tried to compensate (foolishly!) this disappointment by doubling up on my reading. Not a smart thing as this got me more tired and as a consequence, I’m yet to recover.
I intend to run for years or even decades to come and in that grand scheme, skipping one race felt OK, at least objectively. This experience prompted the topic of this blog — something that has been on my list of topic-ideas for a long time.
Long term success is mostly a result of avoiding ruin than about crossing fancy milestones along the way. It seems like Charlie Munger firmly believes in this credo. Many great contemporary investors have spoken about this approach and how it helped them achieve superlative results in the long term.
“It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent” — Charlie Munger
The power of consistently avoiding stupid things is probably among the most underrated super powers accessible to humans. This does sound like taking fun out of life — a very defensive approach, if you may. Path to extraordinary success is almost, always boring, painful, tedious and has very little glamour, if any. The eventual result is certainly glamorous — few interim results could be too.
I’m happy to wager that conscious acts of omission probably contribute more to the ultimate result than any number of acts of commission.
The capacity and willingness to suffer the day-to-day humdrum, boredom and the tedium of patiently identifying and mitigating risks on the path to progress contribute tremendously on the long route to success. Conversely, the lure of visible and high octane interim results is the biggest hurdle.
“People are trying to be smart. All I am trying to do is not to be idiotic, but it’s harder than most people think.” — Charlie Munger
In the game Cricket, particularly ‘Test’ format, it is generally the bowlers who win the matches. Way more often than not, they lose their wicket by unnecessarily poking at balls going down the “corridor of uncertainty” (hint: Glenn Mcgrath!) or going for lofty/unnecessary shots; they often fall into the trap of beguiling bowlers, get tempted to take them to the cleaners just a little too soon and in the process lose their wickets — acts of commission. It is then not surprising that most of the great batters of cricket have strong defensive technique (Virendra Sehwag is an exception). They have technique and/or temperament enough to get through the tough balls so as to be able to capitalize on inevitable bad balls.
In American football, despite rules increasingly favouring the game of offense, strong defense continues to be the key enabler of success. At the very least, strong defense creates opportunities for offence.
In the field of finance, the greats who created enormous wealth for their clients and themselves have necessarily avoided reckless risks and also avoided financial alchemy. Examples include Warren Buffet, Charlie Munger, Parag Parikh, john Templeton, Mohnish Pabrai, Howard Marks, ohn Bogle etc. They don’t buy and sell stocks all the time. They research all the time, they learn all the time and occasionally they buy (or sell) stocks (and sometimes whole companies).They resist any craving for action. They instead focus on avoiding mistakes.
Interestingly, most successful investors tend to live long — most of their noteworthy successes accrue in the later part of their life. They understand that good health and personal relationships do not come from watching too much TV, eating too much food, working too hard, being stressed out too often etc. They in turn come from spending quality time on personal relationships, personal growth and some exercise and good food. Again no spectacular heroic actions, just avoiding mistakes.
Even if I may be inadvertently using the “defense is the best offense” strategy as a justification to tide over my disappointment of running the marathon, make no mistake about the “super-power” status of this strategy. On your path of great success, never take up a reckless risk that has potential to put you completely out of the equation. If you manage the risks on the path, returns will take care of themselves. It is also worth remembering that not taking any risk is among the biggest risks of all — this needs to be managed too.
“Beware the investment activity that produces applause; the great moves are usually greeted by yawns.” — Warren Buffet
