“So far 2020 is like looking both ways before crossing the street and then getting hit by an airplane”.
The level 5 lockdown, Britain withdrawing from the European union, South Africa rating to junk status or Trumps impeachment Trials all happened this year even if it feel years ago.
The changes in the financial markets was no different. March 2020 was one of the worst months in history, but now at the end of the year we are sitting with above inflation returns.
The speed with what the market sold off and then went back up again was unpresedented.
What lessons can we take from 2020?
Good to take stock and consider how you managed 2020.
When Mike Tyson was asked by a reporter whether he was worried about Evander Holyfield and his fight plan he answered; “Everyone has a plan until they get punched in the mouth.”
It is easy to have a plan on paper but when the markets actually fall by 20% as in March, where you able to handle it and stick to your plan?
Better to make decisions when the emotions have subsided, than to make decisions in the moment.
Staying calm and sticking to your plan in times of stress once again proved to be the best thing to do.
Become Anti Fragile
Anti Fragile was written in 2012 by Nassim Nicholas Taleb, but even more applicable in a year like 2020
The basic definition Taleb gives to Antifragile is “Things that gain from disorder”. Things that are antifragile benefit from randomness, uncertainty, and variation.
The classic example of something antifragile is Hydra, the Greek mythological creature that has numerous heads. When one is cut off, two grow back in its place.
The idea is not to only withstand challenges like those that we had in 2020 but actually be better off than before.
To see opportunity even when it seems worse than before.
So how can I apply it in my own life?
Principles to live an antifragile life:
- Experiment and tinker. There is no certainty anymore and the only way, you are going know if something is going to work, is to implement it and pivot around it until it works.
- Resist the urge to suppress randomness. Most people is not comfortable with the unknown, but we will need to get used to the idea that we are not in control and act accordingly
- Avoid risks that, if lost would wipe you out completely. In business and even more true in investments is that you can’t bet everything on one outcome. There is no such thing as a “sure thing” anymore
- Know where you are going. The destination and principles are more important than the method.
- Stop optimising for today and tomorrow and start playing the long game. Maybe less efficient in the short term but more effective in the long term.
We are living in uncertain times. One person can look at it and see all the risks and failures, while another person can see all the opportunities and see it as the best time to be alive.
Thank you for 2020 and hope you enjoy the festive season and the well deserved break.
Our wish for 2021 is for us all to build businesses, investment portfolios and Financial Plans that are anti Fragile and that can thrive in the upcoming years, don’t matter the circumstances.
PJ Botha CA(SA), CFP ®