Force for thought — 27.12.24
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
In 2009, psychologists from Yale and UCLA conducted an instructive experiment. In it, participants were asked to put themselves in the imagined shoes of hungry waiters who, surrounded by delicious food while working at a restaurant, couldn’t eat on the job. Then, they were shown images of luxury goods — cars, watches, appliances — and tested for how much they would spend on these. The result? Even though their experience was mediated i.e., they themselves were not hungry and unable to eat, the feeling of restraint generated by the experiment depleted their capacity for self-control, evidenced in their proclivity to spend more. Ironically, this highlights two key problems faced by investors: 1) the behaviours of surrounding investors have enormous potential to influence our own; and 2) the more energy we expend on resistance, the less capacity we have to make sound decisions.
So, what can we do about it? If we resist — we can turn off our notifications; ignore the news; mute our group chats — we will only undermine our capacity for self-control. Better to implement a strategy that doesn’t erode self-control but instead nurtures positive, routine and productive habits. By adapting investor behaviour to tune into Force500’s feedback loop — which shifts focus away from volatile price movements — investors can preserve and accordingly expend their energies in effective, rather than destructive, ways. The more effortful an investor’s journey is — i.e., the more self-control an investor must exercise — the lesser the likelihood of success. If we can control for that variable, and we can, investors can optimise their abilities to hold onto their investments for the duration.
To Have on Hand
Joy: The Birth of IVF tells the story of a Cambridge scientist, Dr Edwards and his team, who were responsible for the world’s first IVF baby. All the odds were stacked against them, with no precedent for what they set out to achieve. Arguably, all that his team had to cling to was their mindset — shared by mothers who longed for a baby but couldn’t have one on their own. Their unique edge? They were able to take the long view, unfettered by short-term setbacks, of which there were many. Undoubtedly, Edwards would have made a fantastic investors. In a poignant scene, he explains: “I’m a scientist, Jean. I fail every day in the hope I’ll succeed once in 20 years.” Eventually he did, altering history forever.