Don’t Dump Your Stocks On Trump

Anshul wrote about the mental model of Antifragility some time back. It is a term coined by Nassim Taleb, and he defines it as being the opposite of fragility. So, things that benefit from shocks are antifragile. They thrive and grow when exposed to volatility, randomness, obstacles, disorder, unexpected events, change, and stressors.

An example of something that’s antifragile is Hydra, a serpent-like creature from Greek mythology that grew two new heads every time you cut one off. In Indian mythology, there is a similar character called Raktavija, a demon who had the magic boon that every drop of blood shed from his body gave rise to another Raktavija (literally the blood borne).

In this context, one thing or character that looks highly antifragile in today’s world is…hold your breath…Donald Trump. 🙂

This US presidential candidate has received massive criticism – and for obvious reasons – ever since he entered the field. But note this, the more he has been criticized for his past deeds and present words, the more robust his base has become. In fact, despite whatever the world thinks of the character of Donald Trump, this guy is on the verge of becoming the world’s most powerful man.

The way Trump has thrown his punches around to gather media attention over the past few months, and without paying too much attention to what other candidates do or say, makes him antifragile. Isn’t it? The way he seems to have prided himself on unpredictability and instinctiveness in whatever he has done in life, and despite that has come so close to gaining superpowers makes him antifragile. Isn’t it?

And these are some big lessons for you, dear investor. Donald Trump isn’t one you must emulate at any cost, but there are lessons we can learn from him that could help us make better and more sensible decisions in life and investing.

5 Lessons from Donald Trump
Lesson number one is to ignore negative criticism and remain focused on what you set out to do (and please set out to do positive things, unlike Mr. Trump). The more you ignore critics, and the more you remain focused on your work instead, the stronger you would become. Interestingly, going by Trump’s behaviour during the entire campaign, he has looked more interested in strengthening his brand (damn the truth!) than wanting the White House. And thus, he has surely won even before the election results are out.

Lesson two is, work with an Inner Scorecard. Everyone, including Trump, has one. Whatever the world thinks of you, what you are and what you think of yourself is what really matters. Here’s what Warren Buffett is quoted as saying in his biography, Snowball –

The big question about how people behave is whether they’ve got an Inner Scorecard or an Outer Scorecard. It helps if you can be satisfied with an Inner Scorecard.

I always pose it this way. I say: ‘Would you rather be the world’s greatest lover, but have everyone think you’re the world’s worst lover? Or would you rather be the world’s worst lover but have everyone think you’re the world’s greatest lover?’ Now, that’s an interesting question.

Here’s another one. If the world couldn’t see your results, would you rather be thought of as the world’s greatest investor but in reality have the world’s worst record? Or be thought of as the world’s worst investor when you were actually the best?

In teaching your kids, I think the lesson they’re learning at a very, very early age is what their parents put the emphasis on. If all the emphasis is on what the world’s going to think about you, forgetting about how you really behave, you’ll wind up with an Outer Scorecard.

Interestingly, for Donald Trump, he is actually what the world thinks he is. But for most of us, often our Inner Scorecards and what the world sees them as, don’t match. And that does not matter. Even if you do everything right, the reaction might be failure, disrespect, jealousy, or even a resounding yawn from the world. If you are motivated by the wrong thing – if ego holds sway – this response will crush you. But it’s a brave soul – one with the Inner Scorecard – who can keep moving when all seems lost, all the fans have left the building and, in their place, are people shooting, “Boo!”

Even when it comes to investing, focusing on the Inner Scorecard works. Remember what Ben Graham wrote in The Intelligent Investor?

…and that’s the only thing that makes you right. Then, you don’t have to worry about anybody else.

And then, like Buffett is quoted in Snowball, if your investment results are not there in front of others to see, you are better off being thought of as the world’s worst investor when you know that you are doing sufficiently well for yourself.

Lesson number three is of not focusing much on the unpredictability of things. No one knows what Donald Trump believes and would do if he comes to power. Even he doesn’t seem to know, and he doesn’t seem to care about it.

Trump has rounded his election campaign on restoring America’s “greatness,” whatever he means. So he has criticized the US foreign policy as “a complete and total disaster. No vision. No purpose. No direction. No strategy.” But what did he offer as its replacement? Nothing systematic. Everything superficial.

Thank God you are not running for any such post and neither you have to fake it in front of 320 million people, but what Trump teaches here is to let the future unpredictability be and instead focus on what could be done in the present.

For you, ignoring uncertainties (who would become the next US President?) and instead focusing on the risks (can I lose money permanently in this business?) and your own staying power (would losing money permanently in these stocks destroy my financial life?) is what is paramount.

Lesson number four from Trump is that most good things in life and investing are due to good luck. So, like him, you must be willing to welcome the chance of being lucky. But, unlike him, you must be humble enough to give luck its due credit.

And finally, here’s lesson number five from Donald Trump that could lead you to tremendous success in life and investing. Like Charlie Munger says, if you wish to succeed and live happily in life, you must know what you want to avoid…and you must know the person you want to avoid becoming. Need I say more on this?

How much ever the world (including me) hates Donald Trump and fears of him becoming the most powerful man in the world, we must give credit to this man for the lesson he teaches, though subtly.

You got my point, didn’t you?

So, when it comes to your stocks, please don’t dump them on Trump. Have faith in the future, and be optimistic about the power of long-term compounding, unless you are planning to spend the money you currently have invested next month, or even within the next three years (if so, that money shouldn’t be in the stock market anyways).

Trump may become the most powerful man in the world, but remember that this too shall pass.

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Also Read: Win the War, Ignore the Rattle