As I type this, the Olympic Games are taking place in Tokyo. Growing up, the Olympic games were an event that took place every four years (before they started staggering summer and winter games in 1994) and because of that, they provided a way to measure the different eras of the lives we lived. For example, when I moved to Atlanta in 2004, some people would look differently at people who moved to the area before versus after the 1996 Summer Games in Atlanta. Even though the Olympics only take place every few years, our desire to vicariously feel the highs and lows of athletes is constant...and therein lies the problem.
It is easy to get swept up in the drama of the games, and the compelling stories of the participants. We can’t help but be drawn to (to borrow a phrase from the Wide World of Sports) “the thrill of victory and the agony of defeat”. The truth though, is that winning is often quite boring.
In fact, sometimes the biggest “winners” that I see are the ones that actively avoid emotional peaks and valleys. When we think of history’s great baseball players (or more specifically great Yankees), it’s hard not to think of Babe Ruth, the twelve-time American League Home Run leader. Another name that may come to mind is Derek Jeter. Jeter was a five-time world series champion and a fourteen-time All-Star. He led the league in home runs precisely ZERO times in his twenty years playing for the Yankees, despite being the franchise’s all-time leader in games played (2,747), plate appearances (12,602), and at-bats (11,195). A big part of the reason that he was a first-ballot hall of fame inductee (with 99.75% of the vote) was all of the times that he DIDN’T hit a home run. You see, among his many accomplishments, Jeter is the Yankees' all-time career leader in hits (3,465) and doubles (544).
Clearly, there are more ways than one when it comes to winning. Jeter may not have brought as many crowds to their feet as Ruth did by sending so many hits over the outfield wall. What people often forget about Babe Ruth is that there were five seasons when he led the league in strikeouts. He was well-known for having an “all or nothing” style. Chasing the “thrill of victory” meant increasing the chances of having to suffer the “agony of defeat.”
Successful investing is not like a home run derby. It is more akin to an entire professional career that lasts a lifetime. Just like ESPN loves to talk about the home run race, financial media loves to present us with a steady stream of stories about the “all or nothing” characters. What keeps us glued to our TV screens are highlight reels of moments of ecstasy and agony. This is unfortunate since I would argue that most great long-term successes are built on what I would call “The Glory of Boredom.”
Lately, it has become hard to ignore the constant stories of overnight crypto-currency millionaires or of young people who bet everything on a “meme stock” that was being pumped up by a group of speculators on the internet. Over my years of working with many different types of investors, I notice a common characteristic among the most successful ones. They are not afraid of boredom. They often even embrace it. They understand that winning over the long-term is more about being reliable than it is about being spectacular. They know that the inherent cost of swinging for a home run is an increased potential for striking out.
Try this quick thought experiment. Consider every asset that you have today. Think of your real estate, your savings, and all of your investments. Think of your salary and think of the lifestyle that all of these factors create for you. Now double all of it in your mind. Contemplate your life with twice as much money and income. I imagine that this feels pretty good. The second step of this experiment is to go back to thinking about your true assets, income, and lifestyle that you enjoy today. Now cut all of it in half. Picture having half as much in the bank, half as much invested, and only 50% of your annual income. I bet that many people would be devastated if this came to pass. The point of this exercise is this: For most of us, the good feelings that came from doubling our net worth were nowhere near as strong as the pain of having it cut in half.
My most successful, and often happiest investors seem to understand this paradigm instinctively. For this reason, they are never too exuberant in a good market and never too upset when things are down. It all gets to be a bit boring and they like it that way. They live in a world where they are beyond the need to ask for a high-risk investment in an attempt to receive an outsized reward. They aren’t looking for the “thrill of victory,” so long as they avoid the “agony of defeat.” They embrace the “glory of boredom” and the profound contentment it provides.