Patience & Delusion
NPR still occasionally does an interesting story, so my son and I were listening on the way home from an early morning swim practice when A Martinez interviewed Live to See the Day author Mark Medley on Morning Edition (but to give you a sense of how time passes, my son was driving this time, not me). I hadn’t heard of Mark or his new book before, but I perked up when Martinez asked him about the fine line between patience, determination, and delusion.
See, Medley’s book is about people “striving for a goal they are never going to achieve” (think trying to contact extraterrestrial life), with Medley making the point that delusion is not necessarily a negative trait. After all, without it, no one would ever do anything that was potentially important, but very low-probability.
That got my son and me talking about patience, determination, and delusion, and I told him about a public equity fund manager I respect who had recently sent me his year-end returns. Without diving into too much detail, this is someone who had once strung together three of the best years I’ve ever seen, only to now have strung together three of the worst.
So what I asked my son was when something that once worked seems to have stopped working, when should someone give up and change course versus trust the process and persevere?
He hemmed and hawed, but finally said that the guy probably needed to do something different.
And I agreed – except for the fact that in investing, if you change your approach, you can get chastised for “style drift,” which is what your investors call it if you start doing something different from what you said you were going to do. It’s also a rock/hard place situation. Investors will pull their money if your returns are bad, but they may also do so if they sense style drift.
Of course, I think if I called this manager up and asked him if he was going to change his approach, his answer would be no. That every strategy has periods of being out-of-favor. That discipline matters.
Is this patience? Or is it delusion? Or was it patience and now it’s delusion?
All of the above.
– Tim
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