It was February 1st, 2015. Many of my Washingtonian clients remember the date all too well. I imagine all of our clients from Massachusetts do as well. The Seattle Seahawks were in the Super Bowl against the New England Patriots. Seattle was losing, but a touchdown would cinch them the championship. In the final seconds of the game, the Seahawks were literally on the 1 yard line. They had time for one final play to eke out the last few feet.
The Hawks could run the ball, or they could try to pass. The head coach Pete Carroll ground his gum, jaw working as furiously as his mind raced. He made the call.
Pass. Interception. The Seahawks lost, the jaws of defeat snapping shut on an otherwise amazing season and fantastic team. Everyone and their mother sat there, bewildered and upset, desperately searching for someone to blame.
Leaders take credit when things are good; they also take the blame when things are bad.
“Why would you throw it? What a terrible call!” Hundreds of thousands of televisions heard the words. As the Patriots celebrated their victory, the Hawks went home with their heads held low. Years later, looking back, many people still remember that call as one of the most reviled play calls in NFL history.
That said, I still face the cold, hard truth: Pete Carroll didn’t make the wrong call. At least, not at the time. Given the statistics, the context of the game, and the choice before him, he made the right call. The outcome was all wrong, the argument to run instead of pass was there, and history will remember it as a bad call because they lost…but when you step back and rationally consider the circumstance, he made the right call. Run the play a hundred times, and his choice would almost certainly have been right the most often. There is a reason teams run the ball less and less as the years go on. No one would have said it was the wrong call if they had scored.
Pete Carroll’s call and subsequent Seahawks loss reminds us of the most difficult kind of loss to accept: the kind where we make a difficult but correct decision, but wind up wrong. Knowing that you almost made the other choice–that feeling of the right choice slipping through your fingers–can haunt you with regret like little else can.
If we aren’t careful, this can be our reaction to investing–we can dwell on the losses we sometimes experience as investors. We can look back at 2022, COVID in 2020, or even the 2008 Great Financial Crisis and think to ourselves “I should have sold.”
The convoluted reality: in hindsight, the future looked clearer and more predictable than it really was. We kick ourselves and question our decision-making. And our primal instinct is to feel far more pain from loss than joy from gain.
What makes this even harder to stomach is that you can look around and find examples of the ones who didn’t do it right and still found success. Their bad choice was rewarded with success. They shut their eyes, swung for the fences, and connected against the odds. They sold because they were afraid and accidentally timed it right. The blind squirrel found a nut. It’s the same story as the gambler who bet it all on black and won, who picked the lucky horse to win, who bought Bitcoin in 2014, who bought the little-known company called Amazon in 1997, who won the Powerball lottery off their single ticket.
It is incredibly difficult to overcome the story, the excitement, the apparent ease, and the dopamine rush. Their stories stare at yours smugly as you continue your comparatively prosaic, mundane march. Like the slim woman with the perfect metabolism mowing down her third scoop of ice cream while you chew the cud that is your kale salad, it seems completely unfair.
Resist that urge to speculate and guess and abandon the plan. The best choice is still the best choice. The key to success is remembering that your success in investing is not based on a single opportunity. Your success as an investor does not hang in the balance like it did for the Seahawks in the Super Bowl on the last play of the game. Your success hinges on making small, correction decisions over and over and over again.
By consistently staying invested and saving and staying patient, our predicted outcome changes. We are no longer a coin toss from winning the Super Bowl. The laws of probability stack the odds overwhelmingly in your favor. Your range of outcomes narrows and improves. Bad luck giving way begrudgingly to almost certain financial success.
It doesn’t work and doesn’t work and doesn’t work until it does. The key is patience, a willingness to keep trying, and the grit to stick to the plan. Success doesn’t come from scoring that touchdown–it came from the thousand little decisions done right in the season leading up to that moment.
After all, if success were as easy as one right call, lottery winners would never go bankrupt.
Economics 101: there is no free lunch. We take the lumps and the occasional setbacks on the path to success. We make the right choices, and we keep making the right choices even when it doesn’t seem to be working. It is the unexpected marriage of faith and mathematical inevitability.
If the average expected return of a certain portfolio is, for the sake of a random number, 7% per year, that doesn’t mean we are getting that return in year 1. Or year 2, for that matter, Even after 5 or 10 years, your results will vary. But with every year that passes, your chance of achieving that outcome increases. As the number of years grows and grows,, the chance of achieving that average return approaches 100%.
Of course, we will make changes and pivot from time to time–it isn’t always a pure, blind trust in what has always worked. Sometimes we do need to rebalance/tweak investments for any number of reasons. But the spirit of the math remains.
The Seahawks unfortunately only had one chance to make that 1-yard touchdown. You are in a much happier situation–you get to try again and again and again. Your success does not hinge on any single correct decision. It is the happy result of a mound of small, good choices over time.
Photo by Larry Maurer - https://www.flickr.com/photos/larrymaurer/8197080670/, CC BY 2.0, https://commons.wikimedia.org/w/index.php?curid=22773829
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