Hope won't get you onto the extra mile, but this just might

Back in 2015, I read a book called, The Zurich Axioms, by Max Gunther.
Since that time, I have spent a lot of time trying to put Max’s ideas into practice.
The following are some of my reflections on what I’ve learnt about hope.

Recently I suggested that letting hope get the best of me led to times when I failed to profit.
And by profit, I, of course, mean more than just money, and so does Max.
Which is why his book is of such interest.

Mr. Gunther had this to say on hope:

When the ship starts to sink, don’t pray. Jump.
Accept small losses cheerfully as a fact of life. Expect to experience several while waiting for a large gain.

His reasoning is easily backed up by a little bit of math.
Let’s say you start with $100 and lose 10%.
You are down to $90.
Then you gain 10% and you are up to $99.
That’s right, more than an 11% increase is needed to get back to the original $100.

Yet, this is not what us new investors are known for.
We’re known for instead, we hold (or “hodl” if you’re part of the “it” crowd).

As a hoping investor, I am inspired, but not by math or any other kind of logic.
Instead, I am inspired by hope sprinkled liberally with imagination.
There are three specific things that I imagine:

1. I imagine that “It’s going to come back”

This is especially true when I’m investing cryptocurrency.
Given the volatility of the asset, wild fluctuations are entirely possible and often seen.
So, it’s easy to say, “Well, tomorrow it’ll just bounce right back.”

And the dangerous part is, sometimes that’s true!
Except tying my money up so that it can’t profit me is never the best solution.

Here’s where math often plays a role for me.
I sit down and figure out whether or not selling short and buying at a lower price will turn a profit for me.
That way, if the market does come back, I stand to profit a lot more.
If it doesn’t, I now have a position that makes me a little bit of profit.

This can also be true when investing in people.
It can be hard to give up on someone you’ve given time and effort to.
Yet, holding on too long doesn’t benefit anyone.

2. I imagine that if I haven’t sold, then I haven’t yet lost anything

Actually, this kind of thinking makes sense in one place: when you’re invested for dividends.
When buying an asset that is meant to provide dividends, the value (cost) of the asset is irrelevant as long as the dividends perform as expected.

Other than that one instance, though, imagining that paper losses aren’t real is just foolish.

Outside of the world of monetary investment, I fall for this, too.
I imagine that if I bury my nose in a book then the problem that I should be investing more time and effort into fixing will just go away.
Books may not be your particular escape, but I hope that you may still be able to relate.

Unfortunately, though I have fallen victim to this hope more than once, I have not yet worked out a fool-proof way of guarding myself against it.
I suppose you could say that escaping from escapism escapes me.

3. I imagine that I can gain 100% of the time and never lose

I want to always win and never lose.
When I choose to live in reality, though, it’s clear that losses happen.

Sports provides the go-to example to illustrate this for most people.
Even top-performing athlete loses more than s/he wins.
It is possible to build an incredible career and be considered a stellar performer with just slightly better than average performance.

Another name for “slightly better than average performance” is “the extra mile”.
How do you get to “extra mile”?
For myself, I simply look for anything that average performers complain about and just do it.
Any time someone around me says, “That’s not my job”, “I don’t get paid for that”, “That’s so beneath me” or anything like it, I roll up my sleeves and get at it!
My observation is the same as the late Zig Ziglar’s, “There are no traffic jams on the extra mile”.

Having explored a little bit about hope and the imaginings it inspires, I can say that Max Gunther is exactly right when he says, “When the ship starts to sink, don’t pray. Jump.”

I’d love to hear about any time you jumped or didn’t, and how things worked out in the comments below!