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- 3 Short Stories With Investing Lessons: Michael Jordan's (Actual) Motivation, A Roman Military Tradition, & Warren Buffett's "Why"
3 Short Stories With Investing Lessons: Michael Jordan's (Actual) Motivation, A Roman Military Tradition, & Warren Buffett's "Why"
Buffett shows the importance of "High Stakes"
Read Time: 4-minutes
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Today, we’re going to look at 3 short stories that hold lessons we can apply to investing (& the rest of our finances)…
**First, I’ve got a special surprise for you**
Click the link below to “Get the Guide”
With August now in the books, I created a “Cheat Sheet” summarizing all of the lessons from last month’s newsletters…
This makes it easy for you to find valuable ideas (or refresh your memory) on all of the topics we covered including:
Charlie Munger's Decision-Making Technique To Avoid Major Mistakes
5 Habits Warren Buffett & Charlie Munger Recommend To Build
7 Steps To Build Investing Habits Like Warren Buffett (From James Clear’s “Atomic Habits)
The Mentor Of Warren Buffett's Most Important, Versatile Mental Model (& Its 3 Major Advantages)
7 Ways To Use Benjamin Graham's Margin Of Safety Principle To Minimize Mistakes (And Losses)
How do you get the August Guide?
Simply click here to download: Get the Guide
Now, let’s check out what we can learn from today’s stories…
Michael Jordan's (Actual) Motivation
The greatest basketball player of all time, Michael Jordan, famously didn't make the varsity team in high school. What's less known about the story is that anyone would have been a long shot to make it.
Here is Thomas Lake writing about what happened after interviewing Jordan's high school coach, Clifton Herring:
"In those days it was rare for sophomores to make varsity. Herring made one exception in 1978, one designed to remedy his team's height disadvantage. This is part of the reason Mike Jordan went home and cried in his room after reading the two lists.
It wasn't just that his name was missing from the varsity roster. It was also that as he scanned the list he saw the name of another sophomore, one of his close friends, the 6'7" Leroy Smith.
Over the next three decades Jordan would become a world-class collector of emotional wounds, a champion grudge-holder, a magician at converting real and imagined insults into the rocket fuel that made him fly. …Jordan quickly became a jayvee superstar.”
Any negative event can be turned into an asset—if we choose to view it that way.
Similar to Jordan, we can turn our investing losses & mistakes into fuel for greater motivation, lessons, & wisdom.
As Charlie Munger shared:
“Most of Berkshire's success grew from stupidity and failure that we learned from. I hope that makes you feel better about your own life.”
— Charlie Munger
— Investment Wisdom (@InvestingCanons)
8:42 PM • Aug 27, 2024
A Roman Military Victory Tradition
After a major military victory, the triumphant military generals were paraded through the streets to the roars of the masses.
The ceremonial procession could span the course of a day with the military leader riding in a chariot drawn by four horses:
There was not a more coveted honor. The general was idolized, viewed as divine by his troops and the public alike.
But riding in the same chariot, standing just behind the worshipped general, was a slave. The slave’s sole responsibility for the entirety of the procession was to whisper in the general’s ear continuously, “Respice post te. Hominem te esse memento. Memento mori!”
“Look behind. Remember thou art mortal. Remember you must die!”
The slave served to remind the victor at the peak of glory, this god-like adoration would soon end, while the truth of his mortality remained.
Remember, thou art mortal.
As investors, when all is going well, we would do well to remind ourselves of this, too...
When a trade goes right, it can feel amazing. Intoxicating even. We begin to think things like:
"We knew we were right all along."
"Ha, the other side of the trade lost—we won!"
But mean reversion, or the tendency for outperformance to revert back to average, is real.
So, having our own version of the Roman slave whispering in our ear: "Thou art mortal" would be wise.
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Warren Buffett's "Why"
"Schroeder [Author of the Buffett biography "The Snowball: Warren Buffett and the Business of Life"1 ] : Well, one time I went out to dinner with [Warren Buffett] at Gorat's, and Marge Lauren, who is the widow of one of his earliest partners, came by and said hello. After she left the table, he said to me:
'That woman is the reason I run Berkshire Hathaway the way I do, because her entire finances depend on me. Every dime she has is in Berkshire Hathaway stock.'
He said, 'I am trying to run Berkshire so that for a generation after I am gone, it will still be healthy and fundamentally a sound company.' He said, 'Beyond that, there's really not much I can do, but I can try to set it up so that the businesses that Berkshire buys and the way its capital is structured and the fundamental pieces of Berkshire have enough longevity to carry on. And there are no guarantees, but that is what I am trying to do.'
I believe that he is always looking at the risk profile of Berkshire Hathaway and trying to take out risk, build in conservatism, make sure that the assets are accounted for in a way that they are not going to end up later being worth less than they appear to be on the books, and in effect create that thing that isn't a perpetual motion machine, but that will keep going. He likes to say that a cardboard cutout should be able to run the company. That's an unattainable ideal, but he really wants people to look at it after he is gone and say, this man created something sustainable.
We might think this is a story about investing conservatively, removing risks, and structuring investments…
Of course, to an extent, it is.
But there's another lesson we can learn here:
Finding "high stakes."
Buffett's "why" for building Berkshire was bigger than himself. Bigger than making money:
He knew that the people he cared about had their entire livelihoods staked on his decisions.
And when we align our incentives with something we deeply care about, it makes it easy for us to decide to:
Remain firm in requiring a margin of safety in our investments.
Stay within our circle of competence.
Ignore the noise around markets.
When the stakes are high, decisions are simplified.
So, a good question for us to revisit periodically:
"What's my 'Why?'"
Well, that's all for this week.
I hope you enjoyed these stories & lessons.
See you next Saturday.
P.S. Is there another topic(s) you would like me to cover? If so, reply to this email—I read & respond to ALL emails. If I receive enough interest in the topic, I'll be sure to cover it.
Two resources I think you might like:
Book Summaries: One of the most important lessons from Charlie Munger is to strive to become a little bit wiser each day. To accelerate my learning on everything from investing & decision-making to negotiating & habit-building, I use Blinkist (Thank you to the Blinkist team as their affiliate program helps keep this newsletter free to the reader). Blinkist offers easily readable book summaries to help you get the most valuable ideas from the most popular books. You can check out Blinkist here.
Mental Exercises: To paraphrase Morgan Housel, the common factor among elite investors is they have complete control over the space in between their ears. Financial news networks and social media can create a lot of "noise" for investors. To stay focused and calm, I like to use Headspace (I don't receive any compensation from Headspace currently). Headspace offers mindset and breathing exercises to help you keep control over the space between your ears. You can check out Headspace here.
Footnotes:
1 — I do not receive any compensation on purchases made through Amazon.com
Disclaimers
This material is not investment advice. No responsibility for loss occasioned to any person or corporate body acting or refraining to act as a result of reading this material can be accepted by the publisher. Additional disclaimers here.