Today, I will tell you something about my family that you probably don’t know.
A truth I’ve never shared here on TOM.
Are you ready for it?
Wait for it…
We are…
Zoo-people.
You know, the kind of people that go to the zoo all the time, and their kids know obscure facts about the Okapi and the Tasmanian Devil. Yup, that’s our family.
The Orange County Zoo, the Safari Park, the Santa Ana Zoo, and the San Diego Zoo – we have passes to all of them.
So, where did we spend Memorial Day? You got that right, the Safari Park. Fun fact: it’s the only zoo in the country with a Platypus.
Speaking of fun facts, the zoo keeper shared an interesting little truth about the male platypus. What you may know is that the male platypus has a venomous spur on its ankles. What you probably didn’t know is that there is no antivenom. According to the zoo keeper, each platypus has a unique venom, their own blend of sorts, so an anti-venom just doesn’t exist.
From what I’ve read, the pain is excruciating and impervious to painkillers. Supposedly, it’s not deadly, but the pain is extreme and long-lasting.
Who knew this little duck-beaver-otter mutant could pack such a punch?
Investing Parallels
I didn’t mention that this zoo keeper was quite an animated fella, so his quirky personality and platypus trivia were branded in my memory. And, as I often do, I thought about how this random truth parallels well with investing.
Today, we will unpack those similarities as we discuss the reality that black swans do exist, there is no antidote, and what doesn’t kill you makes you stronger.
Black Swans Exist
Nassim Taleb wrote the famed book The Black Swan: The Impact of the Highly Improbable. According to Wikipedia, the namesake was derived from “A Latin expression which presumed that black swans did not exist. The expression was used until around 1697 when Dutch mariners saw them in Australia. After this, the term was reinterpreted to mean an unforeseen and consequential event.”
For us less scholarly, it’s like if you saw a pig fly by. You’d simply have to stop saying you’d do this, that, or the other “when pigs fly.” Otherwise, you’d be way overcommitted to a list of activities that you never intended to do.
Just like our platypus, black swans are real but rare. The Safari Park happens to have the only two platypuses outside of Australia.
When it comes to investing, some risks may only surface once in your lifetime (rare), and the pain/venom of that event will be unique. As you’ve heard it said, “History doesn’t repeat itself, but it often rhymes.” This means we won’t have another Dot Com Bubble, but euphoria will surface again. We won’t have another Global Financial Crisis, but over-leverage will rear its head again. I’ll stay away from COVID, but you get the point.
The important thing here is that you accept that black swans do exist. Markets will surprise you, that’s what they do. The Dutch were surprised by black swans. America now has two platypuses, and I think I’m safe to assume that I’ll never see a pig fly. The key is that we don’t want to be surprised by improbable AND we also don’t want to try to predict the improbable. Surprise leads to emotional reactions that are financially painful, and ill-timed predictions also lead to costly financial pain.
No Antidote
When it comes to investing, everyone is looking for an antidote (or antivenom), and one simply doesn’t exist. Investors want the rewards and benefits (returns) related to investing but not the pain. They love the idea of the upside potential and abhor the idea of the downside reality.
A surprisingly common question I’ve received recently is, “What’s your investment plan/strategy to deal with a potential World War III scenario?”
There are a myriad of answers I could give. I could say I don’t know. I could say, “Dividend Growth.” I could laugh – probably not appropriate, I just laugh when I feel uncomfortable. Here’s the answer I’ve settled on. Well, not the answer, but rather the question. I reverted the question back to the investor, “What’s your investment plan/strategy to deal with a potential World War III scenario?” I ask this not to be cheeky, and I ask because I’m curious. I want to know what someone’s thought process looks like for combating this what-if.
There are a lot of antidote imposters out there. I’ll keep this short and simple for you. Gold doesn’t behave as most assume, bonds don’t always cooperate as we’d like them to, and hedges are more expensive than people realize.
There is no antidote.
What Doesn’t Kill You
In 2002, America was introduced to one of its favorite TV shows: American Idol. In the first season, 20-year-old Kelly Clarkson was the last contestant standing.
Some 10 years later, Clarkson would top the Billboards with her single, Stronger. I’m sure you are singing the lyrics under your breath right now, “What doesn’t kill you makes you stronger.”
Whether it’s exercise, education, or a job you hate, there is something character-building about a good challenge—something you hate to endure but appreciate in hindsight.
As I said, the venom of a platypus isn’t deadly, but it sounds like it’s quite painful – just like investing. For those long-term investors on the other side of the Dot Com Bubble, Global Financial Crisis, and Covid, they can attest to the rewards of endurance, the payoff of pain. As they say, no pain, no gain.
Clarkson was right, what doesn’t kill you does make you stronger. Hindsight is indeed 20/20, and a basic study of market history should be a confidence builder. So much of hope is going through a crisis, coming out of that crisis, and then building up a faith that you will overcome the next crisis thrown your way. Hope is a powerful tool and one investors would be wise to embrace.
Venomous? Yes. Antidote? No. Deadly? No. Tolerable? Hardly. Endurable? Yes.
What doesn’t kill you makes you stronger. So, lean into the obstacles and headwinds. Embrace the pain, as it’s the only path to the gain.
Zoo Family
As has become common here on TOM, you now know a little bit more about me and my family. We are zoo-people.
My kids could teach you a thing or two about the aye-aye and the Gila monster. Lots of Wild Kratts in the Cummings household – if you know, you know.
I hope you enjoyed my parallel between markets and platypuses. I hope the article made you laugh a bit, think a bit, and walk away a better investor.
As always, any and all questions and comments are welcome. You know where to find me… at the zoo 😉
With regards,
Trevor Cummings
PWA Group Director, Partner
tcummings@thebahnsengroup.com
