Tails You Win, Heads You Die

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Here’s a confession: I’m a coward when it comes to heights.

That’s why I was squirming on the couch last night watching a documentary called Free Solo.

It contains what may be the most insane, epic example of human bravery — or stupidity, depending on your attitude.

Free Solo is about a young man called Alex Honnold. He’s a mountain climber.

But Alex is one of a rare breed who gets a further kick out of his sport — by occasionally not using ropes or any other safety gear.

One slip, mistread or bad grip and he’s dead — plunging to a very grisly end. Plenty of his fellow mountaineers — and friends — have gone that way, too.

There’s a simple 50/50 outcome on this. You either make it to the top or you die.

That must sharpen the mind…and the preparation!

Perhaps it’s one thing to climb with no rope on a modest cliff face in Bavaria or Switzerland or something (don’t ask me — I plan on avoiding them all).

But Alex’s dream was to climb something called El Capitan.

Imagine a 3,000-foot-high vertical rock face in Yosemite National Park and you’ll get the idea.

Nobody had climbed this ‘free solo’ before. It looks damn scary enough with a harness and rope.

Sometimes on the way up, you have no more than a ledge that can accommodate two fingers or a toe.

You’ll have to squirm through a narrow crevice. You’ll also need to traverse an area with no apparent grip at all.

Now imagine climbing it with no safety gear for the four hours or so that it takes to get to the top.

And this was being filmed — meaning anyone watching could see this guy plummet at any time.

See why I was squirming?

But I couldn’t deny one thing. There could be a lesson here for all of us…

You couldn’t fault Alex Honnold on one front. He brought total dedication and commitment to preparing for this climb.

He had years of previous mountaineering experience. His body was conditioned.

He was callous enough to tell his girlfriend that her extreme concern would not stop him. Alex would climb El Capitan — or die trying.

Alex does not pretend to be a happy or content person.

At one point in the film, he says ‘happy and cosy’ people do not achieve great things — suggesting only a demon or two can motivate such extreme behaviour.

That’s a level of commitment few can match.

But Alex also had a wildcard up his sleeve that few people can replicate…

Your brain is your enemy at times

It was an unusual amygdala. This is the key part of the brain that goes back to the dawn of humanity, as far as I know.

But for today’s purposes, you only need to know one thing: It’s the trigger house for the flight or fight response.

If you’re going to feel fear, it will be pumping out from here first.

In the documentary, a researcher takes a scan of Alex Honnold’s brain. She notes his amygdala seems subdued relative to the general population.

That means he has a much better chance of climbing a vertical cliff face with no safety gear and not freaking out over the insane drop below him, or tormenting himself with visions of what could go wrong.

That brings him a level of calm and detachment in one of the most extreme scenarios a human could possibly find themselves in.

But what does this have to do with investing or markets?

Are you prepared to go to the same level?

One is Alex’s level of commitment. You and I can be inspired by that. The share market is not a place to dabble.

It requires constant learning and attention to keep finding opportunities and avoiding the duds.

You won’t always succeed, either. That’s discouraging. The only thing you can do is pick yourself up and keep going.

I find I’m much more comfortable holding a stock through a nasty selloff (like we’ve seen lately) when I’ve done a lot of homework on it.

A lot of this is quite tedious.

Often I’ll read the prospectus and old announcements for a company that’s traded on the market for years.

That means the information is way out of date.

But how else do you find out if management have done what they said they’d do?

Most people won’t do this. There’s an edge in grunt work like this.

Alex Hannold finds he’s more confident on the mountain the more climbing he does. Confidence can trump fear when it’s earned.

And that’s the other thing we can learn from Alex. You must find a way to stop your emotions from damaging your decision making.

We don’t all have an unusual amygdala that can suppress our fear response when the market is in turmoil.

But we can have a strategy in place to handle any turmoil before we risk our money.

It can be a stop loss, or position sizing, or diversification, or whatever method you care to use.

The important thing is to have a plan for those hairy moments.

Alex Hannold climbed El Capitan with a rope many times to know the areas that were tricky and identify potential pitfalls.

He kept a journal so he could memorise what to do in those scary moments.

He repeated this until he did not need to worry about what to do.

All he needed to do was execute.

He may be crazy brave, or nuts, but there’s also some wisdom somewhere in that brain.

Best wishes,

Callum Newman Signature

Callum Newman,
Editor, Profit Watch