Force for thought — 20.09.24
To Have and To Hold
How do you hold onto a good thing and not let it go before it has time to work its magic? By mobilising a method that works. No one is insulated from the challenges of sticking with something promising — not a diet, nor an exercise regimen, or even a first date — the moment it becomes uncomfortable and hard. Why should investing be any different?
We’ve collected more than four million data points that demonstrate how a particular methodological communication enables investors to hold on for the ride. The proof stretches beyond investing: our ability to hold on when we least want to — in order to withstand things that can cause our undoing — has application everywhere. Each week, we’ll show how and why a mechanism for holding on, in investing and in life, is so powerful.
Zooming in
We’ve all heard of the Stanford marshmallow experiment. It was a real-time test of delayed gratification: faced with a marshmallow and 15 mouthwatering minutes, the children in the study were promised a second marshmallow after the time was up — on condition that they could resist eating the first one. Human nature hasn’t changed much since then, but countless iterations of the experiment have followed — including one of note in 2013 at the University of Rochester. There, the same experiment unfolded but the children were divided into two groups, respectively exposed to reliable and unreliable experiences while waiting for their marshmallows. For example: while both groups were promised extra crayons and better stickers to bide their time, these were only delivered to one group, impacting the deprived group in two key ways. First, their trust in the delivery of a second marshmallow was broken and second, their perception of delayed gratification was transformed into a negative.
What does this tell us? Besides the obvious — that we struggle to look out for our future selves when we live in the now — it also demonstrates that reliable, positive and routine experiences not only transform how we feel on our journey but also edge us closer to our destination. In the absence of reliable experiences — like Force500’s feedback system, delivered to investors twice-weekly — our journeys may be negatively coloured by everyday disruptors in life (the news; fluctuating markets; a bad day) that have the potential to derail us. Knowing the return we hope to generate on our investments — and furthermore, knowing that our return will be greater the longer we stay invested — is not enough; we have to survive the path to get there.
To Have on Hand
The late great Charlie Munger lived by his core guiding principles and chief among them was the mastery of delayed gratification. In countless interviews, he emphasised the importance of cultivating delayed gratification in order to be a successful investor, often citing the original marshmallow experiment as a case study. Munger understood the profound value of holdability. Like he said: “People are born deferred gratifiers or not. But if you have a slight tendency to deferred gratification, and if you can feed that tendency, you’re on your way to prosperity and happiness.” Or else? “That demand for immediate gratification is the way to ruin.”