Josh Kaufman of the Personal MBA attended his subscribers to the following excellent article titled ‘Why Blacksmiths are Better at Startups than You’.
The article talks about start-ups and learning a difficult craft in general, and the necessary emotional intelligence which is necessary. The moral of the article: It is very difficult and scary to start a company, but if you are prepared to develop the necessary knowledge and skills, the world is at your feet. Emotional intelligence (perseverance, patience, dealing with setbacks and critique, discipline to do what is necessary and important, and not what you like to do at that moment, learning to follow advice of experts, etc.) is absolutely essential for success.
The importance of emotional intelligence in this area is comparable to investing. The necessary knowledge is easy and almost all the knowledge for successful long-term investing can be summarized in two simple steps:
- Define a suitable portfolio allocation (which percentage of the portfolio will be invested in stocks, bonds, real-estate, etc.) according to your time horizon and maximum volatility requirements;
- Buy one or more widely diversified and cheap index funds according to your portfolio allocation which you rebalance once per year and NEVER EVER deviate from this strategy, no matter what.
The difficulty in investing is almost 100% in the emotional component: Do you have the faith that the chosen strategy will work in the long run? Do you have the fortitude to stick with your strategy, even in challenging times? Do you have the determination to stick with your strategy even when everyone around you is telling your you’re wrong? Do you have the patience to wait for the strategy to work? Do you have the discipline do nothing when you would like to be active?
The lack of basic knowledge and especially the lack of emotional intelligence of many investors, from time to time produces enormous opportunities for long-term investors to beat the market.
Many modern people lack the necessary emotional intelligence to learn difficult crafts. We want something for nothing and we want it now (instant gratification). This, of course, is nothing new, but what is new, is that we are ‘abstracted people living abstracted lives’. Because many of us have lost touch with nature, we have lost touch with nature’s laws. A farmer knows that he cannot reap before he sows, and that he can’t wait until September to start sowing. But students may think that they can get good grades in school without studying or with waiting until the last moment before a test to start studying. Buyers don’t seem to think it is a bad thing to buy stuff on massive amounts of credit.
Business is a reality engine:
Don’t work on the basics every day? You’ll fail.
Don’t market constantly? You’ll fail.
Don’t solve your customer’s pains? You’ll fail.
Don’t ship? Ha!
There you go: business in four sentences.
When modern people get confronted with a reality where results are the only thing that matters and where nature’s laws rule, our ego doesn’t know how to handle this, just like a spoiled child, with all kind of bad behavior as a result. However, once we accept and internalize this fact, life becomes a lot easier (both for us and our teachers), and we can actually achieve something.
Mastering a craft, is ‘incredibly fucking hard’. You’d better be sure you what is awaiting you, so you can decide for yourself in advance if you are prepared to make the necessary sacrifices:
If you’re not in it for the long haul, though, don’t bother. If you’re too special to practice the basics, don’t bother. If you’d rather feel validated than achieve a result, don’t bother. If you’d rather defend the status quo than grow, give up now.
On the other hand, if you know what is awaiting you, that may prevent your from starting…
We need to make difficult decisions:
Do you just want to splash about in the kiddie pool and rebel at the first sign of seriousness…
Or do you want to craft a real business and a real life, with reality as your favorite ally? Do you want to surprise yourself with how much you can achieve?