Posted in Money on December 19th, 2016
The Russian general Alexander Suvorov set a historic record by never losing a single batttle in both his major and minor battles, a significant accomplishment considering that he was almost always the underdog in the sixty-three major battles. Excellent financial practice and war share similar attributes, such as conflict, loss, and strategy and studying war can show us some of the best techniques we can use when we’re managing our money.
1. The underdog has the strongest advantage. Both Thomas Sowell and Thomas Stanley have studied financial and economic data in the United States more than most academics and have concluded something surprising about the country: over 80% of millionaires and billionaires never inherited any money – not even a penny. In fact, most billionaires today, like Gates, Zuckerberg and Blakely, were not billionaires forty years ago and the almost all the names from forty years ago have disappeared off the list. What you know from reading our site is that being the favorite often doesn’t matter with money – it’s the underdog who has the most to gain and often it’s the underdog who wins. Look at the simple example of bitcoin: the people with a lot of money didn’t feel they needed bitcoin or that it even offered value. In fact, most of them thought bitcoin mirrored a Ponzi scheme. The same is true for some other excellent cryptocurrencies, like Dash. However, these rich individuals felt that due to their advantage; they didn’t need to take the risk in these instruments, or learn about them. Bitcoin alone has had a more spectacular return than the company Cisco in the 1990s dot-com boom.
Even though he never lost a battle, Suvorov was seldom the favorite. In one of his most spectacular wins, the Turkish army outnumbered him 5-to-1, yet Suvorov lost fewer than 2% of his troops and he won the battle. No bookie today would have given him a chance before the battle and yet the numbers didn’t matter – the Ottomans were routed. Like Suvorov, you may face times where you don’t feel that you have an advantage and that may be the exact advantage you need.
2. Be bold. Suvorov never asked his men to fight in a difficult spot that he wouldn’t join. Unlike most generals, Suvorov wanted to be in the most dangerous area where his men were fighting. Even though he was injured to the point of almost dying multiple times, this didn’t stop him from doing it again. Suvorov wanted to show his men that he would do what he asked and his men respected him for it. They realized that danger was unavoidable in battle, so they focused their energy on winning – danger or not.
Courage requires a unique set of skills that we wouldn’t otherwise obtain if we played it safe. Compare a person buying the S&P 500 index fund to a person who purchased a few bitcoins in 2010: the first person followed the “rules” and needed much less courage than the second person. The second person had to learn a set of skills, such as seeking out people who owned bitcoins, how to store bitcoins, how to protect their bitcoins, etc. Those skills are all even more valuable now than then and look at how much that person would be worth, even though his initial risk would have been a few dollars, or less.
In addition, we’ll never inspire ourselves or others by playing it safe – that is not a winning strategy. Life requires temerity and financial loss is guaranteed. This year, I’ve invested in four mainstream companies that have gone bankrupt. Each of those were a 95+% loss. And yet, in my mainstream investments, I am up against the S&P 500 by triple digits in gain. Compare this to the pensioners who invested in “safe” pensions, but are now unable to collect them; they played by the safe rules and lost. The reality is that we cannot avoid loss, but we can offset it.
3. Embrace accuracy and precision. Suvorov valued weapons that were precise and accurate – the bayonet over the bullet. He lived in a time where guns were known to misfire and miss their targets, even if someone aimed correctly. Suvorov knew which tools were the most accurate and precise for his time, while most of the generals he fought did not. This is an important point that’s easy to overlook in finance – most people are acting on techniques of the past, not the current time. It takes work to understand the current time, but it makes you more accurate in what you do. In general, we tend to like “rules” that require less work and effort because we can follow them and feel good – but what happens when these rules turn out to be outdated? This is a reason my students in Retire Early With Cryptocurrencies are a step ahead of many traders; they are enjoying discussions of the present and learning techniques of handling the present.
An example of this from FinTekNeeks is comparing our accurate information on Zcash versus CoinDesk’s Zcash hype: notice how CoinDesk’s belief was that Zcash would mimic the past of bitcoin and Ether’s return; it did not. Zcash will have to rise above a price of BTC 3299 before one can argue that it finally started to rise. Since it’s starting price was 3299 bitcoins and bitcoin has experienced a 100,000,000% return, measured in bitcoin, Zcash will never return as much as bitcoin (there aren’t enough bitcoins for that return to be possible). CoinDesk wrote from the view that the past would repeat: it did not. Like the generals who fought Suvorov, valuing imprecise tools is dangerous not only for yourself, but for others who rely on you – many soldiers under rival generals lost their lives due to their generals mistake. Many CoinDesk readers lost huge amounts of money.
One Ring to rule them all,
One Ring to find them,
One Ring to bring them all and in the darkness bind them.
4. Discipline gives absolute power. Suvorov ensured that his training was more difficult than the battle itself and for this reason, his troops looked forward to battle because it was easy. When training is more painful than the event, the event is easy and enjoyable. Only discipline moves us forward and discipline always precedes money and feelings; if you want to feel good, be disciplined first, the feelings will come. Like the one ring, all other virtues like courage, patience, diligence, etc require discipline and all vices, like fear and greed, surrender to discipline. Discipline cannot be taxed, controlled with capital controls, or confiscated at all. Discipline is the currency that outlives all currencies.
Suvorov could enter the most dangerous parts of battle with ease because he had discipline on his side; discipline understands and recognizes that we all die, but that we should not allow our fear of loss and death to control what we do. This reality gives us absolute freedom – so we lose everything and die? Who cares; this happens anyway. Why should we let loss control what we do? Living by this reality – which at its heart lies discipline – will change the dynamic of your life more than billions of dollars will. Who wants to be a billionaire who fears loss and death over a general who enters the most difficult battles unmoved by the challenges ahead?
Most of us know that our reality offers nothing as dangerous as war. Suvorov reminds us to seek vision, courage, precision and discipline. All of our time invested in these pursuits is time that’s moving us to a greater future.