How To Commit

Talking about investing is kind of like playing poker: It can tell you a loooot about a person.

For example, whenever I talk to random people about investing, I’ll usually get responses like:

• “Yeah, I should really get started on investing”
• “I invest on-and-off, sometimes I’ll read the papers and buy stocks that are undervalued”
• “Right now I’m trying to learn as much as I can, trying out different strategies” 

These are totally natural responses. When you’re new to something, whether it’s investing, a new skill, a new business idea, finding a new job, etc, it’s natural to spend lots of time researching, trying things out, and generally getting a feel of things.

But as any top performer/entrepreneur/investor will tell you, most of the goodies come only when you truly commit. Becoming a chess grandmaster takes years of practice. Getting rich through investing entails pledging cold, hard cash. Becoming a top performer at your career may mean sticking it out at your job.

So today, I want to explore the murky threshold between “just looking around” and committing. How do you get from one stage to the other? How do you get from sitting on the fence to going all-in?

Commitment rarely happens overnight. Hollywood makes a big deal out of flash-in-the-pan, love-at-first-sight type of commitments, but those are rare. People rarely decide to execute a billion-dollar business idea in 24 hours. People rarely decide to sink tens of thousands of dollars into an investment they just heard about (unless it’s a sucker getting conned by a slimy guru).

Instead, based on my (limited) experience, commitment can be broken down into 6 stages:

Stage 1: The Exploration

This is the stage where you’re checking out the lay of the land. You might be surfing website after website, bookmarking articles, maybe reading a book or two.

At this stage, most of us will probably be delusional / optimistic about our ability to perform in whichever field we’ve chosen. For me, I was 150% convinced that I was going to make $10M buckeroos in 10 years through trading. Of course I couldn’t fail! I’ve read books! I’m gonna be rich, travel the world, retire at 35, and probably cure cancer along the way. Duh.

Stage 2: The Hook

 In this stage, something catches your eye through your research. You don’t know if it’s what you want, but you mentally mark it as “promising”. Maybe you’ll read a couple more articles/books about it, but it’s still on a superficial level. That doesn’t stop you from researching other options, but you’re paying a little more attention to this particular path.

Personally, Stage 2 came to me when I read about index investing in Ramit Sethi’s I Will Teach You To Be Rich. (Scammy title, but one of the best personal finance books I’ve read). That excited me enough to start reading academic research papers about index investing.

The sad fact about having unlimited choices / the Internet means that most people can spend years stuck at Stage 1 and 2.

Stage 3: The Tryout

If the hook was enticing enough, it might spur you on to Stage 3: the Tryout. Here’s where you’re going beyond dry research and actually getting a taste of that experience. In the context of relationships, it’s dating. In the context of a tech company, it’s building a prototype. In the context of investing, it’s putting up just a tiny bit of money, maybe a couple of hundred dollars, into that strategy.

The tryout is a double-edged sword: You’re trying it out to see if you can handle the small problems that come with this new endeavour. But if it sucks too much, then you’re likely to abandon it altogether. Luckily, the delusional optimism from Stage 1 is probably still with you at this stage, and you’re willing to overlook the crappy parts, at least temporarily. This is the equivalent to the “honeymoon period” in a relationship.

If you’re in Stage 3, this is an important time to start thinking about commitment devices. That means asking yourself: What will I do when things get rough? How do I virtually guarantee myself that I’ll stick to the plan?

It’s far better to plan ahead for the crappy scenarios – which will come – while you’re rational/optimistic, rather than wait for the proverbial shit to hit the fan.

Stage 4: The Test

This is the stage where problems crop up. In a relationship, this is where you’ll have your big disagreements. In a business, this is where you’ll realise that nobody wants to buy your product. And when it comes to investing, this is the stage where:

• You’ll start to lose a lot of money
• Some guru will promise you a much better alternative
• You’ll realise that investing won’t make all your dreams come true

The systems and plans that you put in place in Stage 3 will come in very useful here. That’s why it’s important to decide on them in advance, rather than when you’re emotional about your setbacks.

However sucky they might be when you experience them, tests are a good thing. I firmly believe that no one can truly commit until they’ve been tested. Relationships are stronger when a couple resolves their differences. Businesses build better products after they’ve gotten brutal feedback. The employee’s true abilities become more apparent during a crisis, and helps her build greater affinity with her career.

I estimate that people need to go through at least 3 major tests (sometimes more) before they move on the next stage.

Stage 5: The Evaluation

Here’s where you’re considering the possibility of committing. You’ve been through several tests and came out of them not just alive, but a little bit stronger each time. You’ve come to the realisation that there is no perfect solution / app / partner / investment that will solve all your problems, but the one you have right now is pretty awesome.

As Google CFO Patrick Pichette recently wrote in his memo announcing his retirement, “In the end, life is wonderful but nonetheless a series of trade offs.” The tests have shown you that there will be problems, nothing will be perfect, but that’s okay. It’s all part of the process. (Some people refer to this realisation as “maturity”)

At this stage, you’re looking for show-stoppers: Any situations or characteristics that might dramatically change your decision about whether to commit. When you encounter a new problem, your experience during Stage 4: The Test will help you to evaluate if it’s a show-stopper, or if it’s something you can deal with in the future.

The Evaluation stage can take weeks, months, or years, depending on the decision. However, you’ll never be able to evaluate everything perfectly even if you spend a lifetime on this stage. Perhaps you’ll be 80% sure, but at some point, you need to make a leap of faith for that remaining 20%, and move on to:

Stage 6: The Commitment

Here’s where you make the decision to go for it. You’ll never be 100% prepared, but by this point you’re prepared to commit based on the information you have.

Once you make that decision, there’s no going back. You pour your heart, soul, money and time into it. You virtually eliminate the other alternatives. But here’s the thing: instead of being a disadvantage like what you expected, commitment actually helps you to accelerate your way forward.

In some ways, committing helps you to better overcome the crap you encountered in the Test stage. For example, a non-negotiable commitment to index investing means that you hardly bat an eye when the market falls. Personally, I’m pretty numb to the week-to-week movements of the market, since I know I’m in this for the long-haul. To be fair, I haven’t actually experienced a situation where my portfolio has fallen by 60%, but when that test comes, I’m pretty sure I’ll be prepared for it.

For The Rest Of Our Lives

In an age of impermanence, #YOLO, job-hopping and trending articles, it’s harder and harder for us to commit to one craft, one  career, one investing strategy or one person.

But when we’ve found the right one, and go through the stages of commitment, we can assure ourselves that we’re probably on the right track. Interestingly, I’ve found that whenever I commit to something, it doesn’t hold me back like I expected. Instead, it frees me up to pursue even more adventures.

Three days ago, on March 14 (pie day!), I made a commitment to someone special in my life. While on holiday in Lombok, Indonesia, I arranged for dinner at a table by the sea, and asked my girlfriend to marry me.

She said yes.

If you’re contemplating about whether you should commit to something, take heart and be patient. It might be a long, drawn-out process, but when you actually make the decision, it’ll all be worth it.

Image credits: Mustafa Khayat