Have you ever stopped to think about what truly went into creating one of the most iconic works of art in history?
Look for a moment at the breathtaking ceiling of the Sistine Chapel. What comes to mind? Michelangelo. Masterpiece. Beauty. The pinnacle of the Renaissance.
But have you ever stopped to think about what truly went into creating one of the most iconic works of art in history? What was the price for such greatness?
Was it an effortless exercise, a mere stroll through the park for Michaelangelo to create?
Well, it was far from being all sunshine and rainbows for Michelangelo. In fact, in 1509, he penned a poem detailing his experience one year into the project, and it is nothing short of eye-opening. It reveals the price of greatness:
Michelangelo described precisely what Bob Dylan sang, “Behind every beautiful thing, there is some kind of pain.”
Similarly, behind every impressive investment or business track record, there is often some kind of pain. Take Stanley Druckenmiller, for example. Over nearly three decades, he consistently achieved phenomenal success, reportedly never having a losing year and delivering an average annual return of around 30%. However, in 2010, when he decided to close his Duquesne Fund, Druckenmiller revealed the price of greatness. He stated:
"For me the disappointment of each interim drawdown over the years has taken a cumulative toll that I cannot continue to sustain…I continue to care deeply about performing for our clients, and the stress of performing in a way that I consider to be disappointing - even if you do not share that view - persists in exacting a high emotional toll.”
Even the great investors feel pain. It has been a while since the market has faced a significant downturn, so now might be a good time to discuss the cost of greatness–pain.
Seeing your stocks drop 20% feels like a punch in the mouth. Watching a stock freefall 50% is like a kick to the gut. When your whole portfolio drops by a third, it induces panic. While most pain in life has an expected duration - a cold lasts a week, a deep cut heals in about a month - the pain from losing money (whether it’s realized or just on paper) has no set time limit. It can last a day or feel like a lifetime with no end in sight. Not to mention you might be wrong or right.
Behind every microcap that grows into a large-cap, investors must endure significant pain to reap the most beautiful rewards. Take, for instance, Wal-Mart’s stock price from 1972 to 1998.
Over this 26-year period, Wal-Mart’s stock grew 871 times, resulting in a compound annual growth rate (CAGR) of 29%. However, to achieve these remarkable returns, akin to a Sistine Chapel masterpiece, investors had to endure years of hardships and painful mental beatings. For instance, Wal-Mart’s share price fell by 72.5% in 1972 and stayed at that level for 8 trading days. It then took until October 3, 1977–1,218 trading days, nearly 5 full calendar years– for the stock to recover to its 1972 high.
Wal-Mart shareholders would then have to endure the following drawdowns in the share price:
How then does an investor build the tolerance for pain and discern which pain is worth enduring and which should be avoided?
The great Japanese novelist Haruki Murakami once wrote, “I can bear any pain as long as it has meaning.” When I go to the gym, I look forward to each grueling workout and the accompanying pain because it signals that my muscles are growing, I’m pushing my limits, and I’m maintaining healthy habits that benefit my short- and long-term health. The low throb and ache in my muscles after reaching failure in a workout has positive meaning to me.
The same applies to investing. The hours spent gathering quality information, writing, thinking, organizing, and synthesizing ideas from business and various fields can be tedious and, at times, painful, much like working out at the gym. Yet, this effort is meaningful and, therefore, bearable. This preparation helps me grow my understanding, sharpen my skills, improve my pattern recognition, and increase my ability to endure volatility. So, when I invest in companies that align with my framework and their share price falls due to superficial reasons, it’s painful—but that pain is temporary. Great businesses and achievements are enduring. However, quitting a promising investment too soon or at the worst possible time can lead to a much deeper suffering—lasting regret, one of the most profound and enduring pains a person can experience.
However, just as there is good pain and bad pain in the gym, the same is true in the stock market. If I overwork myself, push too far or lift with poor form and injure a muscle, the pain is sharp and intense. There’s no benefit to feeling more of this pain; it signals that I need to STOP and heal immediately. To continue on could lead to irreversible damage. The same principle applies to investing. When you overextend yourself into a situation that you don’t understand, the pain can be severe. These situations often involve poor form by not doing the work or following someone blindly, as well as getting into lesser-quality companies and opportunities where the risk of capital loss is high. In these cases, the pain is everlasting, and you need to STOP, sell and heal immediately.
If you’re not experiencing some form of good pain on a daily basis, you’re not pushing yourself hard enough, and you’re not paying the price for greatness. To achieve something truly remarkable, you have to give up something—in this case, comfort—for everything you gain.
All greatness comes with an edge of pain, so pay the price and don’t complain.
MicroCapClub is an exclusive forum for experienced microcap investors focused on microcap companies (sub $500m market cap) trading on United States, Canadian, European, and Australian markets. MicroCapClub was created to be a platform for experienced microcap investors to share and discuss stock ideas. Since 2011, our members have profiled 1000+ microcap companies. Investors can join our community by applying to become a member or subscribing to gain instant view only access. MicroCapClub’s mission is to foster the highest quality microcap investor Community, produce Educational content for investors, and promote better Leadership in the microcap arena. For more information, visit https://microcapclub.com/ and https://microcapclub.com/summit/
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