George Soros once said, “It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.” It’s the kind of thing that sounds obvious until you realize how few investors actually live by it.
Most of us are obsessed with being “right” as often as possible — we focus on the strike rate instead of the batting average, so to speak — and, as a consequence, we get stuck playing low-stakes games.
It’s (relatively) low risk, sure. But it’s also low reward. To achieve outsized gains, you have to occasionally swing for the fences. Not in a cavalier, “bet the farm and cross your fingers” kind of way, of course.
The reality is that truly exceptional opportunities on the market are rare. So, when you spot one and have done the work to build a rational conviction, the last thing you should be is timid.
The key here isn’t perfection — it’s asymmetry. You want your wins to dwarf your losses so that being wrong isn’t catastrophic; it’s just part of the process. Soros wasn’t advocating recklessness; he didn’t say, “Don’t care if you’re wrong.” He said, “Don’t care how often you’re wrong.”
There’s a massive difference, especially when the cost of being wrong is modest compared to the potential upside.
Once again, it’s our egos that get in the way. Most of us don’t react well to being wrong. It feels bad. It’s embarrassing. We’re wired to seek validation, and admitting we’ve made a mistake is the opposite of that.
But if you’re not willing to look foolish now and then, you’ll never take the kinds of risks that lead to the returns we all dream of. You’ll stick with what’s safe, grinding out incremental gains, terrified of a misstep. It’s like the fear of death causing you to never leave the house; sure, you’ll minimize the odds of a fatal accident, but you’ll also miss out on so much of what the world has to offer.
The best investors aren’t afraid of being wrong because they know it’s unavoidable. They allocate capital with some amount of loss implicitly assumed. They set themselves up to survive their mistakes, and size their bets so that no single loss can sink them.
This is the brilliance of Soros, and his protégé, Stan Druckenmiller. It doesn’t require omniscience, just discipline and perspective — and an appreciation of the probabilistic nature of investing.
Munger was big on this too: “We look for mispriced bets. We bet big when the odds are strongly in our favor—like when we can get 3-to-1 odds on something with a 2-to-1 likelihood of happening.”
And that’s the essence of investing, isn’t it? You’re going to take hits — losses, bad calls, the occasional market blindside. But the game isn’t about dodging every punch; it’s about staying in the ring long enough to land the ones that matter.
Because in the end, it’s the knockout blows that decide the fight.
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