Lean-Into-The-Pain Framework

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In their recent episode of the VALUE: After Hours Podcast, Taylor, Mitchell, Brewster, and Carlisle discussed the Lean Into The Pain Framework. Here’s an excerpt from the episode:

Mike: I think the thing that investors should– if you’re a single stock picker, if you’re not a single stock picker or business analyst, I think the plan is very simple. You just invest every month. Every month. You just invest in an index. You don’t pick a stock. But if you’re a stock picker, and you fancy yourself really good at least very thoughtful about underwriting risk, I think you have to have a framework going into crisis. Steve Cohen said in an interview, “Well, I lean into pain. It’s just framework. Pain is where I want to go. So, show me the pain, I’m going to lean into the pain. It doesn’t bother me, it focuses me. I’m more excited when things are tough.”

I think in 2020, the key was, if you fancy yourself an investor and you really want to try to make money in times of stress, you really want to underwrite credits when you’re a lender of last resort, you have to have a mental framework, because I’m not convinced– Maybe one or two people in the world are able to emotionally divorce themselves from that kind of pain, I am not one of those people. For me, it has to be a, “I’m waiting for this, and when I see it, I’m going to do that. I’m going to do this, then I’m going to do that.” It’s almost, you just got to go on autopilot, because do not give me the– I’m open to new information, but do not change my plan. This is the plan. This is what I’m going to do. It keeps you focused like what are you waiting on? When it happens–

My uncle, I love the guy. Uncle Mark, I love you. I know you’re not watching. The guy sat on cash from the dotcom bursting, he sat on $750,000 in cash, because he was convinced that the world was going to explode post the dotcom burst. When the great financial crisis hit, the guy was like, “I told y’all. I knew it. I told you it was coming.”

Bill: Yeah, you forewent nine years and probably didn’t even get them.

Mike: Correct.

Bill: Yeah.

Mike: Guess what? 2020 rolls around, and COVID happens, and then he’s still got $750,000 of cash. COVID hits, and he calls me, and he’s like, “This is the end of the world scenario.” I’m like, “No, this is when you finally get your shot. This is what you’ve been waiting on.”

Bill: [laughs]

Mike: He didn’t invest. He calls me in April 2021, he’s like, “You take my money. You buy whatever you want to buy. You go take my money. I’m not doing this. I clearly don’t know what I’m talking about.” In my mind, it’s totally okay if that’s the game you want to play, but you’ve got to have that framework going in, because you’ll always talk yourself out of making the decision to buy.

Tobias: Fear is real. The fear that everybody else has.

Mike: Yeah, exactly.

Tobias: You’re a sentient being. You can look out there and see– I didn’t experience the dotcom other than as an employee, but 2007, 2009, there’s some suggestion that was going to bring down the financial system. Buffett was out there saying that too. So, it wasn’t [crosstalk]

Mike: Not some suggestion [crosstalk]

Bill: Meanwhile, if he had, even in 2000, put his money in the Qs, he’d be up 3.5x. He’s been wrong on the end of the world, and lost a shit ton of relative wealth. That’s a hell of a way to be right.

Mike: I think that cost $2 million. That’s what at least– it might have cost more four or five– [crosstalk]

Bill: In today’s world now, that lumbers through the roof, it costs more. Your relative wealth is screwed. Who cares about what your scorecard tells you, it’s your purchasing power is all that matters in life?

Mike: I’m so happy. You brought up lumber. That’s a perfect segue. It’s like we have a few more hours, we can get into that.

Tobias: [laughs]

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