The other day I went shopping at Costco.
As I approached the bank of cashiers, I was faced with the typical decision of choosing a line. I selected one that appeared relatively short and settled in to wait my turn. As it turns out, the person ahead of me was having “issues.” I don’t know exactly what unfolded, but it required the intervention of a supervisor and quite a bit of time. At one point, I pondered switching lines. There were a few that looked to be moving more quickly. However, I decided not to. In the back of my mind, I was telling myself that I had “invested” in this line, so why give up now? Even though my investment was only a couple of minutes, it was enough to keep me from changing course.
When you hear the word, ‘invest,” you probably think of money. This makes perfect sense, as this is the primary term associated with financial portfolios. We invest in many things that have monetary value, such as stocks, bonds, mutual funds, collections, art, designer clothing, fancy cars, and more. Nevertheless, the term “investing” actually has broad application, representing any circumstance in which we dedicate time, space, energy, resources, focus, thoughts, and/or emotions to an endeavor. Furthermore, the investments we make often have a profound impact on our energy, productivity, confidence, decisions, and overall mood.
If we stand back and consider the concept of investing in this wider sense, we become aware of how important it is to invest wisely. The last thing we want to do is waste whatever time, talents, and assets we have.
In order to become wise investors, we first need to observe a few truths about investing.
1. We make investments all day long, every day of our lives.
An investment is any choice we make with how to use our time, talents, and resources. Some of these choices will feel significant, such as buying a car, choosing a career, and selecting a mate. “Big” investments are the ones we tend to make with great intention and care, the ones for which we instinctively understand the gravity of our decision. We crunch the numbers, evaluate options, consider scenarios, pray, solicit input, and otherwise focus on making a decision that will “pay off” in the long run.
In contrast, we tend to be less measured when it comes to our smaller, daily investments. We spend little time considering potential outcomes, believing the consequences are too small to warrant careful thought. Practically speaking, this is necessary. We don’t have the margin every time we shop at Costco to gather data and perform calculations on optimal line selection. Instead, we go through our day making quick decisions, on the go, with whatever information we can easily access.
2. Once we make an investment, we will be reluctant to withdraw from it.
Regardless of whether an investment is large or small, it is important to acknowledge that once we begin down one path, the decision to switch gears may be difficult and costly. This could be a financial cost, such as having to pay a penalty for early withdrawal from a financial instrument. It might also mean lost time, such as when we have to abandon an errand we had begun when we realize that finishing it will make us late for another appointment. There may even be social or emotional costs; for example: we might make someone unhappy with us when we decide to exit a volunteer project.
Sometimes, we are simply too stubborn to admit we’ve made a poor choice. Our pride keeps us stuck where we are. In my Costco example, I felt that it would be a form of surrender to give up and switch lines. I kept thinking, “I’ve already waited so long, I can’t give up now!” We don’t like to lose the “value” of what we have put into a given initiative. Our emotions keep us tethered to our choices, and we rationalize staying put.
3. Not every investment we make will be successful.
No one makes perfect decisions, even “experts.” Renowned investor Warren Buffett talks openly about choices he made that didn’t work out as he had anticipated. In 1993, Buffett purchased the Dexter Shoe Co. for $33 million with stock from his company Berkshire Hathaway. In a 2007 letter to shareholders, he explained that he had made a poor decision, and admitted that the deal cost investors around $3.5 billion, which was around 1.6% of Berkshire Hathaway’s net worth at the time.
“To date, Dexter is the worst deal that I’ve made. But I’ll make more mistakes in the future — you can bet on that.”Warren Buffet
There is a freedom in acknowledging the reality everyone will make some investments that are duds. Most of us won’t lose $3.5 billion, but we are still likely to lose money, time, and self-esteem. It is comforting to know that this is par for the course. A student may invest a large amount of time studying for an exam that he still ends up failing. It happens! A hospitality manager may spend countless hours and money planning an event that ends up being cancelled by a raging novel virus. Who could have known? A driver may make swerve to avoid hitting a deer and end plowing into a telephone pole. That’s why we carry insurance.
No matter how conscientious we are, how much we plan, and how much advice we solicit, we will still make some investments that don’t work out.
4. Our investments can (and should) change over time.
I was an adolescent of the 1980s. One of the popular hobbies of the time was to go to the arcade at the mall and play games. If memory serves, the “hot” games of the day were PacMan™ and Asteroids™. If you wanted to be a good gamer, you spent a lot of money and time standing in front of these machines and practicing. (Confession: I never was any good, but I was always impressed by those who were.)
Today, gaming is completely different. No longer do we drop quarters into a machine at the mall. An entirely new set of equipment and skills is required, and odds are it will continue to evolve. Perhaps in another decade games will be programmed into a chip that we insert into a slot behind our ear!
It is a common tendency to hold onto habits and belongings simply because they were important to us at one time. Unfortunately, it is hard to live freely in the “now” when we are saddled with the baggage of the past. Markets are fickle, tastes change, technology evolves, and trends come and go. We may have invested time, energy, or money on an endeavor in the past, but few investments hold their value forever.
If these principles are true, how can we be wise investors, not only with our money, but with our time, space and belongings?
FIRST: Invest your resources with your eyes wide open.
Don’t jump into anything without thinking through how it will impact your broader life.
For example, if you are asked to take on a new role, ask yourself, “If I accept this role, will it interfere with other, more important responsibilities? If it doesn’t work out, will it be hard to extract myself in the future?”
Consider questions such as:
- Where will I store this?
- What will happen if this takes longer than I anticipate?
- Will I have a hard time letting go of this if I don’t end up liking/needing it?
- What are the odds I will regret this?
- How might doing this now derail the rest of my plan for the day?
SECOND: listen to your “inner voice.”
Often, we have an instinctive feeling about how we should proceed in a given situation. For instance, we have a moment of doubt about whether or not we have enough time to squeeze in a phone call before we need to head out the door. Unfortunately, we frequently rationalize ourselves away from these “gut messages,” and it ends up hurting us. If that little voice is telling you that you lack necessary time, space, energy, or resources, listen to it and don’t invest!
THIRD: be willing to exit when an investment sours.
When an investment we’ve made fails to pay off, we should feel free to cut bait and take our losses. Clinging to a poor investment only results in greater damage. Instead, we should show ourselves grace and give ourselves permission to change course.
A ticket for Titanic’s maiden voyage was a bad investment, but refusing to acknowledge the ship was sinking, and climbing into a lifeboat, was fatal.
Does this idea of “investing” resonate with you? Can you think of a time you should have walked away from an investment you made?