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The last couple of weeks have been great, and I appreciate all of your feedback and input. All of the topics below are things that genuinely interest and excite me. I tend to go down the rabbit hole with these explanations so, if any section isn't your cup of tea, I hope something in another section can be helpful to you.
Enjoy and, as always, please forward along to anyone you think may gain some benefit from reading this newsletter. I write it in the hopes that some piece of it will help improve all of your lives in some small way.
Last week we introduced the concept of Black Swan events with regard to investment strategy. First off, what is a Black Swan? Simply put, these events are unpredictable, life-changing situations that have popped up throughout history in every sector of humanity. The stock market crash that led to the Great Depression is an example of a Black Swan, as was 9/11 in 2001, the housing crisis in 2008, and, most recently, the COVID-19 pandemic in 2020.
Black Swans don't follow the behavior of any particular model, and they often have an oversized effect on every facet of our society. Throughout history, and with financial markets in particular, some of the greatest lasting effects have been direct results of Black Swan events. I will try to be brief and get to the point, but for anyone who wants to explore this more, Nassim Nicholas Taleb's book The Black Swan (link to purchase below) provides a very thorough overview of the topic.
In the context of investments (and this can be extrapolated to making any major life decision), Black Swan events can provide tremendous upside with minimal risk exposure. This is, in large part, how some successful VC funds operate; they invest conservative amounts of money in many companies that show promise, knowing that most of these companies will fail. The good thing is, the companies that succeed more than make up for the countless companies that don't. You can afford to be wrong most of the time if the one time you're right pays for your mistakes and then some.
There are many situations where, if a Black Swan event occurs, the potential reward overshadows the risk. When it comes to investments, if you reserve a small portion of your portfolio for these "moonshot" opportunities, being right once can generate larger gains than the entire rest of your portfolio. The best part is you can be wrong more often than you're right! The key is to manage risk and not become over-exposed to these Black Swans. As Taleb describes in detail in his book, we cannot accurately predict when these events will occur, but we can attempt to maximize our exposure to the upside while minimizing our exposure to the downside.
In the larger context of life, there are many areas that are vulnerable to Black Swans, and we can use these areas to our advantage. With authors, for example, the titles that top the New York Times Bestseller list outperform the other 99% of books being sold that year combined. Simply writing more (if it's something you enjoy), can expose you to these positive Black Swans (any creative endeavor typically has Black Swan potential). On the flip side, if your entire investment portfolio is tied up in high-risk options, then you are over-exposed to potential negative Black Swans. Learning how to put yourself in the best position, and learning how to react instead of predict, are two incredibly valuable skills.
For anyone wanting to discuss this further, respond to this email! I love having deeper conversations with anyone who is interested. To purchase Taleb's book, The Black Swan, you can use the link below. It's a dense read, but the information is top-notch. It's also worth reading just to watch Taleb insult almost everyone on the planet while making his point.
|Purchase The Black Swan here!|
An Athlete's Mindset
James McCann, a professional baseball player for the Mets, recently appeared in a great article about the mindset required to be successful. His debut season with the Mets hasn't gone exactly as planned, with some of his metrics being below his previous seasons. No matter what we do in life, I think we can all agree that we've been disappointed with ourselves and our performance at some point.
The key, McCann says, is to create some separation between our performance and our identity.
He also realizes the importance of perspective when it comes to our failures. I think it's easy for us to get caught up when we underperform, and we can easily use this failure as fuel for doubts in the future. McCann says that, "Just because today doesn't go your way, this week doesn't go your way, this month doesn't go your way, this season doesn't go your way, doesn't mean that next year, tomorrow, is gone too."
Next week I will explore our internal dialogue a bit more but, for now, try to be aware when doubts creep into your life. Focus on becoming aware of that narrative, and see if you're dwelling on a situation that you should be getting some mental separation from. A mistake made in the past does not guarantee a mistake will be made in the future!
Amplify Your Strengths
One concept that I was recently reminded of sort of blew my mind, and I'm hoping it has the same positive effect on you that it did on me. Many of you may be familiar with the concept of embracing your strengths instead of just trying to fix your weaknesses. If you are looking to maximize your success, it helps to do more of the things you're great at and outsource, or delegate, the things that you're bad at. That's certainly helpful, but there is a trap that I have fallen into because of this mindset.
I spent a good portion of my adult life trying to compete at the highest levels in the sport of CrossFit. This was an activity that, for all intents and purposes, was a "strength" of mine. That said, despite my talents and abilities, I was never destined to compete at the pinnacle of the sport. It can be disheartening to put all of your efforts into something but still know that you will ultimately fall short.
The beauty is, we don't need to be the best at anything. There will be very few Michael Jordan's, Tom Brady's, Mark Zuckerberg's, etc. There are, however, people who are extremely good at a handful of things. Maybe you aren't the best writer, the best leader, or the best athlete. But what if, by combining those three things that you are very good at, you become the best person to do those things together?
Right now, I would wager that all of you reading this have some unique combination of things that you are damn good at. You might not be the best at each one, but you may just be the best at putting them all together. If you look at life through that lens, there may be some way that you can massively level up by leveraging your talents together. Don't be disheartened because you can't be the next Kobe Bryant, focus on being the first, and best, you!
That will do it for this week! Please let me know what you liked, didn't like, and what you want to see more of. Do you want it to be longer, shorter? Do you want specific topics covered? Have a wonderful week, and remember to please forward this to your friends -- helping get the word out and get more eyes on this newsletter is hugely helpful and greatly appreciated!
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