The Only Thing You Can Control

In 2020 the global economy shut down. Even with the financial consequences, the S&P 500 is up 2% for the year. A year ago, no one saw a pandemic coming and a few months ago no one saw stocks recovering.

The world is unpredictable. The stock market, fuelled by the emotions of unpredictable people about our unpredictable world is many times more so.

Stock returns are volatile. This holds true for individual holdings and as well as diversified portfolios.

Since inception, the S&P 500 has averaged a 10% annualized return. In its near 100 year history, there's only been a handful of times where it returned 10%. The average is nothing to count on.

You never know where stocks going. The smartest minds have tried, putting together sophisticated models to play fortune teller. Many have been burned doing so.

Models are built with massive amounts of past data. Unfortunately, things that's never happened before happen all the time. Events like Black Monday (1987), the Great Financial Crisis (2008) and the Flash Crash (2010) are impossible...based on the models.

You can't control your investment returns, there are too many unknowns. However, you can control the amount you save. Many investors work tirelessly to squeeze out a few basis points of outperformance. This is inefficient. You can accomplish the same goal by simply saving a bit more.

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The Art of Giving Feedback

Constructive feedback is an awkward affair. You don't want hurt feelings, but recognize the importance of honesty. You've tried the classic "hoping things will get better on its own" and unfortunately it hasn't played out. When giving feedback, here are a few things that I try to keep it mind. Start with empathy. Step into their shoes and understand their story. If you don't know, ask. Be genuinely curious. Feedback is a dynamic affair. Shared communication with a shared goal towards progress. Take the emotion out of it. Focus on the situation, not the person. Focusing on the person adds unnecessary weight to an already emotionally-bloated event. Be specific. Give clear examples. Vague feedback equals dismissed feedback. Doing above won't de-awkward things fully, but it will dampen it and increase the chance of better outcomes.

Bias For Clarity

Bias for action. Gets things done. Go-getter. Traits companies big and small look for. And for good reason, you're being hired to do things! However, action is a secondary step that often overshadows the primary step, direction. Clear direction is the foundation that enables our actions to takeoff. Without it, we're stuck in the mud. Striving for clarity is an underrated skill. Having the courage to ask ( seemingly ) obvious questions, and to check in, making sure we're all on the same page. "O bvious " questions are a low risk, high reward way to add value. At worst, you'll add confidence to our actions. At best, you discover a misalignment that saves us from a dead-end. The more people, the more clear we need to be. The bigger the initiative, the bigger the risk of reaching the finish line, only to realize expectations were off. Success is always uncertain. But we can be certain about what we want and what everyone's job is. Things that can be clea...

Negative Feedback, Positive Lessons

In the battle against plastic bags, a five-cent tax was shown to be much more successful at deterring usage than a five-cent credit for bringing your own bags. Carrots satisfy but sticks sting, and they sting hard. So we default to the less painful choice of avoiding loss. Loss aversion impacts the way we process information. A 2019 study invited participants to learn through a series of multiple choice questions. Each question only had two options to choose from. Whether guessing correctly or not, they would still learn the right answer. Despite the identical learning opportunity, participants were much more successful at recalling the answers they guessed correctly than those they got wrong. "You're right!" feels good. We savour the moment, analyzing every detail. "You're wrong!" stings. We want to quickly forget, dismiss, and move on. When we succumb to loss aversion, we miss opportunities to learn. Failure is part of the process. We'll experie...

Herman Ye

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