Getting Rich vs Staying Rich
Capital Thinking · Issue #948 · View online
“I sat down at my fancy desk on the edge of my chair waiting for the market to open, ready to have another $50,000 day, and thinking life couldn’t get any better than this.
This time, I was right. It didn’t.”
– Investor Jim Paul describing the moment he went from cocky and overconfident to broke and unemployed.
Dangerous Feelings
Morgan Housel | The Collaborative Fund Blog:
Success has a nasty tendency to increase confidence more than ability. The longer it lasts, and the more it was tied to some degree of serendipity, the truer that becomes.
It’s why getting rich and staying rich are different skills. And why most competitive advantages have a shelf life.
Jason Zweig put it:
“Being right is the enemy of staying right because it leads you to forget the way the world works.”
It is of course possible to indefinitely maintain whatever skills brought you initial success. Lots of people and a handful of businesses have done it.
But when success is maintained for a long period the greatest skill often isn’t technical, or even specific to your trade. It’s identifying and resisting a few dangerous feelings that can nuzzle their way in after you’ve achieved any level of success.
A few of the big ones:
1. The decline of paranoia that made you successful to begin with.A common irony goes like this:
- Paranoia leads to success because it keeps you on your toes.
- But paranoia is stressful, so you abandon it quickly once you achieve success.
- Now you’ve abandoned what made you successful and you begin to decline – which is even more stressful.
It happens in business, investing, careers, relationships – all over the place.
Michael Moritz of Sequoia was once asked how his investment firm has thrived for 40 years. “We’ve always been afraid of going out of business,” was his answer.
It’s a rare response in a world where most successful people step back, take stock of all they’ve achieved, and assume they can not only breathe a sigh of relief but that their skills will run on autopilot.
A dangerous situation is when your goals (achieving enough success to relax) counter your skills (focus, paranoia, persistence). It hits you when you feel like past hard work entitles you to a break without realizing the cost of that break, however much it might be necessary and deserved.
It’s part of why people who quit while they’re ahead are so admirable – it’s often not so much that they gave up, but that they’re aware of what made them successful and when that trait begins to wane.
Photo credit: David Clode on Unsplash