The secret sauce of successful investing…

Setting wrong expectations and drawing wrong comparison are two pit holes that are difficult to cross in investing journey. Mark Manson narrated a wonderful story in his book – The subtle art of not giving a fuck. He compared two stories to show how choosing wrong metrics for defining success, setting wrong expectations and making wrong comparison play a role in achieving happiness and success. 

In 1983, a talented young guitarist was kicked out of his band without giving any reason. The guitarist kept wondering: What wrong did I do? What will I do now?

Somehow after coming over his emotions he decided to start a new band. He decided that this new band would be so successful that his old band would forever regret their decision. He would become so famous that they would be forced to seeing him on TV, hearing him on the radio, seeing posters of him in the streets and pictures of him in magazines.

He spent months recruiting the best musicians he could find—far better musicians than his previous band. He wrote dozens of songs and practiced religiously. His agitation oiled his ambition and revenge became his source of inspiration.

The guitarist’s name was Dave Mustaine, and the new band he formed was the legendary heavy-metal band Megadeth. Megadeth sold over 25 million albums. Today, Mustaine is considered one of the most brilliant and influential musicians in the history of heavy-metal music.

Unfortunately, the band he was kicked out of was Metallica, which has sold over 180 million albums worldwide. Metallica is considered by many to be one of the greatest rock bands of all time. And because of this, in a rare intimate interview in 2003, a tearful Mustaine admitted that he couldn’t help but still consider himself a failure. Despite all that he had accomplished, in his mind he would always be the guy who got kicked out of Metallica.

Now a story of another musician who got kicked out of another band. His story is similar to that of Dave Mustaine. It was 1962 and there was a buzz around an up-and-coming band from Liverpool, England.

Pete Best was considered the best-looking of all the members in the band and it was his face that began to appear in the magazines. Many people thought he should be the face of the band, not others. The band was Beatles.

In 1962, after landing their first record contract, the other three members of the Beatles quietly got together and asked their manager to fire Pete. Months later, just three days before the recording of the first record began, the manager called Best to his office and told him to get out and find another band. He gave no reason, no explanation and just told him that the other guys wanted him out of the group. Within six months of Best’s firing, Beatlemania had erupted, making the band one of the most famous bands of all time.

Meanwhile, Best fell into a deep depression and spent a lot of time drinking. The rest of the sixties were not kind to him. By 1965, he had sued two of the Beatles, and all of his other musical projects had failed horribly. In 1968, he attempted suicide. His life was a crashing ship.

Shockingly, in an interview in 1994, Best said, “I’m happier than I would have been with the Beatles.” Best explained that the fate of him getting kicked out of the Beatles ultimately led him to meet his wife. And then his marriage led him to having children.

His values changed. He began to measure his life differently. Fame and glory would have been nice, but he decided that what he already had was more important: a big and loving family, a stable marriage, a simple life. He even still got to play drums, touring Europe and recording albums well into the 2000s. So what was really lost? Just a lot of attention, but what he gained meant so much more to him.

Comparing the two stories…

Dave Mustaine, chose to measure himself by whether he was more successful and popular than Metallica. He adopted “success relative to Metallica” as the metric by which to measure himself and his music career. Despite taking a horrible event in his life and making something positive out of it, as Mustaine did with Megadeth and selling 25 million albums, his choice to hold on to Metallica’s success as his life-defining metric continued to hurt him decades later. Despite all the money and the fans and the accolades, he still considered himself a failure.

On the other hand, Best who was ousted from Beatles didn’t have the same successful story as Dave Mustaine. He never became a global superstar or made millions of dollars. Yet, in many ways, Best ended up better off than Mustaine in terms of his own satisfaction.

These stories suggest that the metrics we choose to compare and the expectations we set for ourselves define our happiness and some metrics to measure happiness and expectations we set are are better than others.

Lessons to learn for investor…

In investing too we often set wrong metrics and expectations which often lead to unsatisfying outcomes and feelings. Often we want to be invested in top performing fund or a stock. Which is practically impossible unless you have crystal gazing abilities.

Most of us can achieve our goals even if we end up investing in an average performing fund or stock. Yet we want top performing fund and chase what is near impossible and often end up screwing up our portfolio. And even if we do manage to generate decent returns, unknowingly we are in regret as we choose a different metric to define success – Just like Dave Mustaine considered him a failure even after selling 25 million copies of his album.

We expect 12% returns and take unnecessary risk when we can achieve our goals with just 8% returns. Unknowingly we take risk of equity when we can achieve our goals through debt. Just because people are investing smallcaps we don’t have to jump in too. We need to see if we need to take that risk.

A 60 year retired teacher who has saved decent corpus and can live on just 6% interest and still leave a good sum for his grand children don’t need to invest in equity unless it is his liking or passion. Just because he saw that equity has given 14% return compared to 8% in his fixed deposits should he take the risk and headache of investing in equity. Really not needed.

The metric we set for defining success in investing is often too high. Expecting to pick a multi-bagger always we miss out so many steady compounders. We are happy with 12% returns until we learn that one friend just earned 18% from a mutual fund he invested through some website. By drawing wrong comparisons we ignore our ability to achieve something and what we have achieved.

A very powerful lesson Dave Mustaine and Pete Best story teaches us is that we should set our metric to define success in investing very carefully. Success in investing doesn’t come from how much returns we have made but returns against our expectations. Setting wrong expectations can push us towards taking unnecessary risks or bring prolonged period of regret even when returns are decent and enough to achieve our goals.

So next time you invest keep a close watch on the metric you choose to define success and set your expectations right. This is the primary secret sauce of successful investing. 

Happy Investing!

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