{"id":5228,"date":"2024-11-29T09:16:30","date_gmt":"2024-11-28T22:46:30","guid":{"rendered":"https:\/\/strawman.com\/blog\/?p=5228"},"modified":"2024-11-29T09:16:31","modified_gmt":"2024-11-28T22:46:31","slug":"profit-over-perfection","status":"publish","type":"post","link":"https:\/\/strawman.com\/blog\/profit-over-perfection\/","title":{"rendered":"Profit Over Perfection"},"content":{"rendered":"\n

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.<\/em>” It\u2019s the kind of thing that sounds obvious until you realize how few investors actually live by it.<\/p>\n\n\n\n

Most of us are obsessed with being \u201cright\u201d 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.<\/p>\n\n\n\n

It\u2019s (relatively) low risk, sure. But it\u2019s also low reward. To achieve outsized gains, you have to occasionally swing for the fences. Not in a cavalier, \u201cbet the farm and cross your fingers\u201d kind of way, of course.<\/p>\n\n\n\n

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.<\/p>\n\n\n\n

The key here isn\u2019t perfection — it\u2019s asymmetry<\/em>. You want your wins to dwarf your losses so that being wrong isn\u2019t catastrophic; it\u2019s just part of the process. Soros wasn\u2019t advocating recklessness; he didn\u2019t say, \u201cDon\u2019t care if you\u2019re wrong<\/em>.\u201d He said, \u201cDon\u2019t care how often you\u2019re wrong<\/em>.\u201d<\/p>\n\n\n\n

There\u2019s a massive difference, especially when the cost of being wrong is modest compared to the potential upside.<\/p>\n\n\n\n

Once again, it\u2019s our egos that get in the way. Most of us don\u2019t react well to being wrong. It feels bad. It\u2019s embarrassing. We\u2019re wired to seek validation, and admitting we\u2019ve made a mistake is the opposite of that.<\/p>\n\n\n\n

But if you\u2019re not willing to look foolish now and then, you\u2019ll never take the kinds of risks that lead to the returns we all dream of. You\u2019ll stick with what\u2019s safe, grinding out incremental gains, terrified of a misstep. It\u2019s like the fear of death causing you to never leave the house; sure, you\u2019ll minimize the odds of a fatal accident, but you\u2019ll also miss out on so much of what the world has to offer.<\/p>\n\n\n\n

The best investors aren\u2019t afraid of being wrong because they know it\u2019s 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.<\/p>\n\n\n\n

This is the brilliance of Soros, and his prot\u00e9g\u00e9, Stan Druckenmiller. It doesn\u2019t require omniscience, just discipline and perspective — and an appreciation of the probabilistic nature of investing.<\/p>\n\n\n\n

Munger was big on this too: “We look for mispriced bets. We bet big when the odds are strongly in our favor\u2014like when we can get 3-to-1 odds on something with a 2-to-1 likelihood of happening<\/em>.”<\/p>\n\n\n\n

And that\u2019s the essence of investing, isn\u2019t it? You\u2019re going to take hits — losses, bad calls, the occasional market blindside. But the game isn\u2019t about dodging every punch; it\u2019s about staying in the ring long enough to land the ones that matter.

Because in the end, it\u2019s the knockout blows that decide the fight.<\/p>\n\n\n\n

<\/p>\n\n\n\n

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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\u2019s the kind of thing that sounds obvious until you realize how few investors actually live by it. 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