Would you rather be lucky than good? Think again.

3/13/2023

In 1994, I finally started making just enough money to buy a house. It was big enough for my wife and sons, aged 2 and 4, but the furniture was spartan. Every dollar I had went into the down payment.

Hungry to get ahead, when my bonus check arrived at year end I decided to start investing in stocks--a radical concept in my family, which regarded a $25 U.S. Savings Bond as a treasured gift. I liked the idea of being the first in the family to trade stocks, and the high risks my family associated with stocks made them even more alluring. So, with that $5,000 bonus I went all in on Dell, spending $3,000 on our first desktop computer (a Dell) and $2,000 on Dell stock.

Then the worst thing in the world that could happen to a first-time stock investor happened to me: The stock took off like a rocket. Six times. From 1994 to 1999, Dell stock split 2 for 1. My initial $2,000 investment turned into $86,000.

My grandfather heard of my success and gave me $3,000 to invest that he had been planning to put into life insurance for my sons' future. I bought more tech stocks: Qwest, Lycos, Yahoo, all initial winners. Then I learned you could buy on margin, borrowing from the stockbroker to buy even more shares.

As my shareholdings swelled, so did my expenses. By 2000, I had sons in private school who were 10 and 8 years old plus a daughter who was 4. All of them played hockey--the most expensive sport in the world. Life was full of payments for equipment, hockey sticks, and travel expenses for all the tournaments away from our home near St. Paul, MN.

You'll recall 2000 also was the year the tech bubble burst in the stock market. The value of my shares plummeted. When that happens and the price of the stocks you bought on margin drops below what you paid for them, the broker demands you make up the difference.

I covered the first one and the second one, but by the third margin call I had to use the cash for the monthly mortgage payment. I could not stop the hemorrhaging. I dumped all of my holdings and lost around $150,000. That was at a time when you could buy a house for that price. For the next 21 years I was convinced I, like the rest of my family, was not smart enough to be successful buying stocks. Everyone on Wall Street was smarter than me. Adding to my beliefs "the stock market was rigged".

How could I possibly win?

I concluded I simply was not smart enough to be an investor.

The pain and guilt we suffer from our failures often triggers another emotion: fear of making a move. It's a survival reaction triggered by the oldest part of our brain, the amygdala. We go into Flight, Fight, or Freeze mode.

As business leaders, most situations require a more complex cognitive approach than what the emotional impulse of the amygdala has to offer. Simply running away from problems is an ill fated option. As business leaders, we must rise above and ask: What were my mistakes? My #1 mistake was simply margining the account. Not diversifying and a tight cash position were secondary factors.

Some people will tell you they prefer to be lucky than good. That attitude certainly supports a whimsical, incurious lifestyle--an indifference to understanding any setbacks. But I believe leaders are people who dig into their losses and failures to learn and identify the true causes, both to avoid those traps in the future and be more likely to pursue the right behaviors.

It took my personal coach/big brother 14 years to help me once again be willing to try the stock market, but even when I got back in I was still so nervous that I gained 10 pounds. Embracing fear is nothing to underestimate. As for me, I'd rather be good than lucky. At this point in my life, being lucky sends me into a panic mode.

What is the greatest pain of your past, or current fear as a business leader? It likely holds your most significant opportunity for growth. There are a number of LBM Dealers who refuse to own a wall panel or truss plant. Their stories have a familiar loop.

Diving in head-first, without the required manufacturing leadership expertise, losing a lot of money . Making matters worse this was the young leader's first big venture deviating from the family business model. There is failure, then their is public failure with dad being disappointed.

Manufacturing expertise requires a completely different set of skills, mindset, and psychology than being a distribution LBM dealer. Not better -- just different.

The decision is simple. Build a business that you can operate day to day and be "THE Day to Day Leader" or build a more successful business that attracts the diverse talent needed to win. Accepting that your role is best served leading only in the boardroom.

Who had the biggest loss on a truss or wall panel plant?

What were your mistakes?

What was the number ONE colossal mistake?

I will send a bottle of my favorite Napa cabernet to the winner.

Hire Smarter™ - Tony Misura