Play to learn and you will never lose

The only way to live your best life is to do your best with what you’ve got, every day.

Nelson Mandela said, "There is no passion to be found playing small — in settling for a life that is less than the one you are capable of living".

In this one:

• Impatience

• Bonds

• Failure

Let’s play.

STORY

Good things take time pt. 2 — If you’re not playing, you’re paying

In the 1985 letter to shareholders of his investment holding company, Berkshire Hathaway, legendary investor Warren Buffet famously said:

“No matter how great the talent or efforts, some things just take time. You can't produce a baby in one month by getting nine women pregnant.”

He wasn’t just stating the obvious. He was reinforcing the importance of patience in investing.

In today’s attention-deprived world, we have been programmed into thinking that we are always saving time by things being available quickly.

Advances in technology have been great at creating access to knowledge, information and markets. But they’ve also fueled a culture of impatience. They’ve resulted in very short-term thinking.

We prefer summaries to full stories. We chase bullet points rather than complete narratives. We have lowered our threshold for patience to accommodate more distractions.

And because humans rely on pattern recognition for survival, we unconsciously apply this algorithm to everything we do. We fall prey to our own cognitive bias–that quicker is always better. In the end, we equate speed to progress, even when it leads us astray.

We expect to find purpose in a single weekend retreat. We want a six-pack in 6 weeks. Worst of all, we buy into the illusion that we can “get rich quick”.

With investing, as with many things in life, slow is smooth, smooth is fast.

During & after the COVID lockdowns, many individuals explored financial markets. But without knowledge of fundamentals and with so much information out there, many would-be investors soon turned into unwitting speculators.

Speculators provide markets with liquidity, aid in price discovery, and take on risk that other market participants wish to unload. 

In theory, this helps improve ‘market efficiency’.

Speculating isn’t gambling. It isn’t guessing. It requires a very high understanding of market dynamics. It is a discipline for professionals who have spent years studying price movements, risk management, and economic trends—people like George Soros, who famously bet against the British pound, or Jesse Livermore, who made and lost fortunes by timing the market.

Unlike long-term investing, speculation demands precision, dedication and a tolerance for high risk—qualities honed through experience, not impulse. Experience requires patience.

Novices more often than not play the role of the greater fool. The chutzpah of the uninformed investor makes a great side for the seasoned trader’s lunch. If you’re not careful, you will quickly move from the menu to the plate.

Investing is a game of knowledge and patience.

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EXPLAINER

Bond vs bond fund pt. 1: What’s the play?

Photo by Jan Huber on Unsplash

I got a question from a reader & friend recently.

I was initially going to address it in a ‘Quick One’ but it presented an opportunity to show some investing principles in action. So I’ll answer it in a series to show you how fundamentals play out in investment decisions.

She asked:

“Does it make sense to invest in a bond fund if you’re already actively buying bonds directly from the central bank? (I see the return on some funds being higher though.)”

So, what should you consider if you were in her shoes?

Assuming that it’s in line with your philosophy, you need to understand that it’s not a quick ‘either/ or’ decision. Let’s build from the ground up.

What’s the difference?

Let’s start by explaining the difference between the two:

When you buy a bond, you’re essentially lending money to the government or a company. In return, you’ll receive regular interest payments and at the end of the bond’s term, you get your principal back. This gives you a predictable income stream and control over the bonds you choose.

A bond fund is a type of Collective Investment Scheme (CIS) where many investors contribute money to buy many different bonds. With a bond fund, you don’t own individual bonds, but instead own ‘units’ in the fund. These units can fluctuate in value as the different bonds within the fund rise or fall in price.

Why this matters

On the surface it might seem like bond funds are the way to go due to the potential for higher returns. But there’s more to consider.

While bond funds give you access/ exposure to many bonds at once, their returns can fluctuate more. Single bonds provide more predictable income but may limit your chance to earn higher returns from a mix of bonds in a fund.

Investment decisions are informed by more than just prices or rates—what are you hoping to achieve with your investment? Are you looking for steady income? Are you prioritizing capital preservation? Or are you seeking long-term growth?

This is where strategy joins the table.

More to come

In the next part of this series, I’ll show you how investment strategy plays in making a decision to set you on the right path. For now, take a moment (or a week) to consider your objectives with the questions above.

Your answers will inform your next step.

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NOTES

You only fail if you don’t learn

Kobe Bryant is one of the greatest basketball players of all time.

His philosophy on life was one of continuous learning, especially through whatever the world calls ‘failure’. Something that he termed non-existent–a creation of our minds, a figment of our imagination.

He said that he didn’t play to win or to lose, but to “figure things out” and to learn. He believed that being motivated by outcomes was a weakness. A weakness because in either direction, it creates fear out of the expectation.

Kobe believed in living fully in the present moment and giving that present moment everything. And it showed in his game. To him, being fully connected to the present moment eliminates fear.

I came across a clip from an interview where he said, “Failure doesn’t exist. The story continues.” His simple but powerful explanation of this statement followed:

“If you ‘fail’ on Monday, the only way it’s a failure on Monday is if you decide to not progress from that. If I ‘fail’ today then I’m going to learn from that and I’m gonna try again on Tuesday, and if I ‘fail’, I’m gonna try again on Wednesday…”

For Kobe, failure only materialized when two things happen:

1. You stop trying; and

2. You don’t learn from it

‘Failure’ is an opportunity to learn. To iterate. To make the next one better than the last one.

What if you had to do it over again? A day, a year, a decade or even more?

You could.

You could just start and choose to do it better.

You could choose to learn, to iterate and to make the next one better than the last one.

You can’t fail if you learn, and you give it your best.

“If you’re going to try, go all the way.”

–Charles Bukowski

Time-out

You're not behind. The past is behind. And you know what happened there.

The future ahead of you is uncertain.

You’re here, now. Always.

So long as you fully commit to the things that matter in each moment, nothing ends.

The story continues.

AG

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