John Keynes once said, “Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.”
What he meant is that people would do better if they were focused less on their reputation and more on what works, but they don’t.
In investing, you cannot do better than average by doing what everyone else is doing. This seems plain and simple, until investors become uncomfortable doing or being asked to do something the crowd isn’t.
Howard Marks, the chairman of Oaktree Capital, illustrates these points brilliantly in his latest letter to investors, Dare to Be Great II.
For those of you who don’t want to read the 9 page letter, I’ll summarize with quotes:
- The real question is whether you dare to do the things that are necessary in order to be great. Are you willing to be different, and are you willing to be wrong? In order to have a chance at great results, you have to be open to being both.
- …you can’t take the same actions as everyone else and expect to outperform.
- By definition, non-consensus ideas that are popular, widely held or intuitively obvious are an oxymoron.
- Most great investments begin in discomfort.
- To succeed at any activity involving the pursuit of gain, we have to be able to withstand the possibility of loss.
- But it’s crippling to have to avoid all failures, and insisting on doing so can’t be a winning strategy. It may guarantee you against losses, but it’s likely to guarantee you against gains as well.
- I’m convinced that everything that’s important in investing is counterintuitive, and everything that is obvious is wrong.
- Unconventional behavior is the only road to superior investment results, but it isn’t for everyone. In addition to superior skill, successful investing requires the ability to look wrong for a while and to survive some mistakes.
Great results will not come without discomfort, and not without risking looking wrong. If you can’t stand discomfort or looking wrong–even temporarily–then you must be willing to save a lot more money (which means spend a lot less of what you make) to reach a successful retirement.
Nothing in this blog should be considered investment, financial, tax, or legal advice. The opinions, estimates and projections contained herein are subject to change without notice. Information throughout this blog has been obtained from sources believed to be accurate and reliable, but such accuracy cannot be guaranteed.