Low Expectations vs High Hopes
Avoid being stripped of the courage to continue
Within the sphere of investing, there seems to be this mentality paradox. One ought to keep low expectations, while at the same time, the very reason we’re here is because we’re hoping to achieve great returns.
So friends, which side should compromise - low expectations or high hopes?
Or could they actually coexist?
Let’s dig in, and tour some places way outside the domain of investing (as we usually do) to look for answers.
At the age of 21, Stephen Hawking was struck by a motor neuron disease that left him completely paralyzed and unable to speak. In an interview, he was asked about his upcoming book, to which he radiated with joy and enthusiasm. Furthermore, he was questioned about how he managed to display such enthusiasm, considering his situation. Through the computer, he replied, "When I became ill, all my expectations disappeared. Everything since then has been a bonus.”
Such a mindset and perspective have put Hawking in a thriving place. He’s able to push forward, be productive, do breakthrough science, write books and aim for his dreams. There are lessons to be learned about his expectations.
"The best investors I know embrace the concept of lowering expectations.” - Ray Dalio, investor and hedge fund manager.
"It's better to have low expectations and be pleasantly surprised than to have high expectations and be disappointed." - Warren Buffet
I could’ve dropped quote upon quote from the great investors. Carl Icahn. Sir John Templeton. Howard Marks. Benjamin Graham. They all point in the same direction.
It seems important to embrace the mentality of low expectations if we seek to thrive as investors. But is it really expectations, at its core, that’s the issue?
I have my doubts. I believe it’s more about acknowledging and accepting human nature - the inescapable psychology of ourselves.
As investors, we need to be in a thriving place, just like Stephan Hawking. We need to be able to do our best work and harness our potential. An optimal state of mind will help us with that. So I don’t think the problem in itself is about expectations, but rather the inevitable responses that arise as a result of unfulfilled expectations.
When we fall into disappointment, we enter the mindset we aim to avoid.
We need a mindset of peace and clarity - that’s where the thriving element is born. We need to be safeguarding against disappointment.
As we try to navigate the level of our expectations, let’s look to stoicism - the philosophy that advocates for low expectations as a means to achieve tranquility.
Stoics are known for believing that we have control over our own thoughts, emotions, and reactions, but we have limited control over external circumstances.
By lowering our expectations, we’re preparing our thoughts and emotions for acceptance, rather than resistance.
But, by elevating our expectations, we set ourselves up for potential failure and discontentment when reality doesn't align with our idealized outcomes.
In the depths of suffering and despair, Viktor Frankl's experiences in the concentration camps offer profound insights into the potential dangers of holding onto unrealistic hopes. As recounted in his influential work, "Man's Search for Meaning," Frankl witnessed firsthand the tragic consequences of individuals who placed their expectations in unattainable outcomes.
Inside the concentration camps, some prisoners clung to hopes of imminent liberation or relief. However, as time wore on and their expectations were repeatedly shattered, the weight of disappointment became unbearable.
These unfulfilled expectations left them feeling defeated, robbed of purpose, and unable to find meaning in anything. It destroyed them, to the extent that Frankl suspects this abyss of disappointment was the tip of the scale that ended the lives of some of his peers.
This example is as extreme as they come, but it reveals the principle we’ve been exploring: entering into a state of any kind of disappointment will leave us in a place where it’s really hard to function at our best. Or function at all.
Yet, if you read Frankl's book, you’ll see he does not advocate for the abandonment of hope. Lowering our expectations, as Frankl suggests, does not imply settling into a life devoid of aspiration. Rather, it is simply a recognition that the gap between our expectations and reality can lead us to a dark place.
So by adjusting our expectations, we avoid the emotional burden of unfulfilled assumptions, making it easier to keep going. Keep trying.
It’s a fine balance between accepting the short term and hoping for the long term.
We might not know the duration of the long term. But in between the bumps in the road, there might be some other rewards that we can hope for.
Winston Churchill once said on the topic of success and failure: “It’s the courage to continue that counts.”
The courage to continue is in and of itself a virtue worthy of our hopes. This is what we should aim for - not to be in a position of disappointment, but rather in a position of courage.
Of courage to keep moving toward a future that we may not see, but that manifests itself as the sum of all the courage we’ve shown time and time again.
Now, I guess we’ve reached the point where it’s time to tie this somewhat major philosophical thought back into the seemingly minor task of investing. But I think it’s sufficient to leave it with this:
Perseverance is important in investing, and I believe perseverance is more easily attainable in a state of acceptance and tranquility, rather than disappointment and discontentment.