
The Conviction that Inspires Us
The best stock ideas are hated or unknown in the beginning and loved in the end.
If you’ve been a stock picker for 10+ years a small part of you always wonders if the last big win you had was your last. You must not believe that.
In 1831, William Kirkpatrick agreed to compensate Abraham Lincoln (22 years old) to move some saw logs.
Kirkpatrick refused to give Lincoln the equipment he needed but Lincoln still completed the job. Kirkpatrick then paid Lincoln $2 less than the agreed upon rate ($75 less in today’s dollars). Kirkpatrick stiffed him.
A few months later Governor Reynolds of Illinois called for volunteers to join a militia against a Native American named Black Hawk.
Black Hawk was a Sauk leader who led raiding and war parties. The Sauk and Fox tribes ceded their lands in 1828 and were relocated west of the Mississippi river to the newly formed Iowa Indian Territory.
In 1832, Black Hawk became frustrated and moved 1500 of his people back to Illinois which sparked local militia groups to band together to force Black Hawk back to the Iowa territory.
Among the companies that responded was one from Menard County, Illinois.
Abraham Lincoln was still seeking work and doing odd jobs, so he was the first to enlist, and it didn’t take long for the quota of men to be met.
An election was held among the company for whom was to be the captain. A few men wanted Lincoln.
Lincoln didn’t want the position, but finally consented to be a candidate.
The only other candidate was William Kirkpatrick, the man who previously mistreated Lincoln, and who was one of the most influential men in the area.
The election process was simple. Lincoln stood on one side of the room and Kirkpatrick stood on the other side. Each man of the company was to choose their leader by standing beside either Lincoln or Kirkpatrick.
Immediately, 75% of the men stood beside Lincoln. When it was obvious Lincoln was going to win, the few standing next to Kirkpatrick left him, and stood next to Lincoln.
Kirkpatrick was left all alone. Lincoln the wronged laborer was now his ex-employer’s captain.
Later in life, Abraham Lincoln said no other success during his entire lifetime had given him half the satisfaction he felt that day.
The early self-confidence he gained would power him through the next round of struggles. In fact, later in 1832 Lincoln would lose his first political race for Illinois State Legislature.
Many people say early success is a horrible thing because it gives you misguided confidence in your abilities. I disagree.
I often think about how lucky I was that my first experience in the stock market was a big win. It didn’t matter that it was 100% luck. It didn’t matter that I mistook a bull market for brains. The experience gave me self-confidence.
The early win proved to me “I could do this and it could be done”, and that’s all that mattered.
If my first investing experience would have been losing most of my money instead of achieving a big win, I would have likely moved on to some other money-making endeavor (started a business, a career, etc).
A couple years later when the technology/dot-com bubble popped I lost 90% of my money. But it didn’t destroy me because I still had self-confidence. Why? Because I made money before – I knew it could be done. It didn't occur to me that it couldn't be done again. I made the money back.
Abraham Lincoln was 7-5 in elections during his career. 7 wins and 5 losses. His last two elections were wins in 1860 and 1864 for the President of the United States.
An election is basically a popularity contest. How crushing it must be to lose. Your entire State or even Country chooses the other person over you. Everyone knows you were the loser. An election loss has to crush your self-confidence.
In 1858, Lincoln lost in a Senate race against Stephen Douglas. This was only two years before his historical Presidential win.
In a letter to a friend after the loss, Lincoln expressed determination rather than discouragement:
"The fight must go on. The cause of civil liberty must not be surrendered at the end of one, or even one hundred defeats."
The longer you pick stocks, the more wins and losses you accumulate. Most people say you learn the most from your losers. I disagree.
Many of the losers I've had, there was nothing to learn. In fact, the real lesson was to forget and move on. To not let the losers change who I am, change my strategy, change my principles. To not let the losers slow me down and steal my courage to act on the next opportunity.
A handful of massive winners will likely make up a bulk of your lifetime returns. If you’ve been a stock picker for 10+ years a small part of you always wonders if the last big win you had was your last. You must not believe that.
In the final year of Roger Federer’s playing career, he said,
“It is always in my mind that I can still crush anybody. That’s not an issue. If you don’t believe you can win tournaments anymore, then you can’t do it.”
Stock picking is a game of self-confidence.
Whether you win or lose today another big win is right around the corner.
A win that could make history.
This week I was interviewed by the Excess Returns Podcast. I hope you enjoy it:
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