Competing vs. Comparing

Competing comes from Latin meaning “strive with”.  That sounds quite appealing, but rather contrarian to what many Americans do.  Even more so in the investing world.

Competing against yourself, tends to always be healthy.  You are comparing yourself today, to yourself yesterday.  Are you improving? We should all strive for that.

My lens for comparing took a sharp turn for the worse in April.  I was asked to come up with a metric driven algorithm to grade and “force rank” 700 Agile App Development Teams (I have accidentally become a software consultant, but it keeps my business acumen and intellectual curiosity peaked).

I had several reservations to this that also apply to the investing world:

1.     Short-Term Measurements can lead to dangerous behaviors.

2.     You create winners and losers when we are all on the same team.

3.     What is the benchmark and is it relevant

And for the sake of what?  More effort to rank teams based on a multi-variate analysis of complex systems won’t get you anywhere - it won’t in investing either.  The more effort you spend, the more marginal decay you will have. You have to keep it simple and just make it about temporal comparisons.

Investing leads to a “competitive” mindset.  Many think that if you spend more time on this that you should have better outcomes.  When you listen to all the talking heads on CNBC or Bloomberg, they are all trying to crack the code, but what is funny is that nobody really talks about how good someone else’s ideas are.

What I find is that I can pick any timeframe and make myself look good and the client can pick any timeframe and make me look bad.  

This from Ben Carlson this week in Fortune

Since the peak of the dot-com bubble in 2000, the S&P 500 has delivered annual returns of just 5.3%. Yet since March 2009, returns are more than 16% per year. Go back to November 2007 and returns are a more pedestrian 7.3% annually. Yet going back to 1995, returns are close to 10% per year, dead on the long-term averages.  

There will always be ammunition for both sides of the bull and bear debate in almost every security or market imaginable for the simple fact that markets are cyclical. That means you can win any argument about the markets by simply changing your start or end dates to suite your stance.

Here is where the concept of comparing breaks down.

I am yet to see a single investment plan that is built on beating the market.  I am yet to see a client who has a picture of themselves with their money. The comparison is meaningless.  What matters is that the client understands their life goals are the only thing that matters and that I am helping them achieve that with the highest degree of confidence that is building over time. They are striving with themselves.

What if I had the best investment returns for every advisor in the state of Virginia?  So what? Beating other advisors isn’t what I am here to do. I am here to enable client wealth.  That may mean taking less risk and having lower returns that another advisor, another fund, or God forbid, your blowhard neighbor or brother-in-law.  Walks, singles, doubles will be at the plate a lot longer than strike outs and home runs. Funds in the top 20% one year aren’t likely to be there next year – so be warned.

Comparing has nothing to do with who is richer, who is happier, who is more intelligent.  It has to do with ego.

Compare kids to other kids is a personal emotional trigger.  Think of how flawed this is. My son – he is 11, and 67 pounds. He has friends that outweigh him by 50 pounds on his baseball team.  He has struggled at the plate this year. He went from batting .380 to .240. However, there is a lot of missing context in those numbers.

More importantly, my son is a pitcher and he hasn’t seen many opportunities on the mound this year (his heart is breaking, and mind right along with him.  He loves to pitch. His room is like walking into Clayton Kershaw’s locker at Dodger Stadium. His statistics, when I compare them to others, are pretty good. However, when I compare them to his teammates, I get resentful that he hasn’t had more opportunities.

Easy the biggest pain point for me is that his first time he ever pitched, he pitched 54 pitches.  He hasn’t reached more than 45 this year.

When I compare them to his previous years pitching, my resentment turns to pride.  His first year pitching, he had 50.5% strikes. Now he is up to 64.8% strikes. I have seen him work (and continue to work without the opportunities) and I couldn’t be happier for his ability to not get discouraged.

Let’s talk about my daughter.  She is on a soccer team of nine.  I am lucky I know how to even spell soccer. She enjoys the game and her teammates. More importantly, her teammates enjoy each other and have no ego at all.  Shannon is probably a tier II player. She is motivated, she is smart, but she isn’t the most talented. She will do fine because it is easier to educate the motivated than motivate the educated.

She hasn’t scored this year.  However, she leads her team in assists AND she has read over 100 books year to date.  Most comparisons are isolated to one metric. I want her to score for her own fulfillment.  That said, when I look at her full body of work, she is quite an accomplished little girl.

In both cases, if you compared my kids to others on their team, I grow irritated.  Am I not working enough with them? Are they lazy? Are they really not interested?  What can we do differently?

When I take the time to compare my kids today to their yesterday, that frustration turns to contentment. Higher strike percentage, fewer walks, better change-up, more assists, better conditioning. They are doing the best with the hand they have been dealt.  End of story.

Now look at your investment profile and your life goals.  If you are working to do the little things – save before you spend, understand your risk profile, follow the retirement plan, and stop looking at the stocks scrolling by CNBC, you are in a much better place because you are working to be better than you were yesterday.

Just like with my kids – if you choose to compare, you will likely introduce fear, greed, envy, and regret – all unhealthy emotions, that may cause you to do something more dangerous and more regretful.

Josh Brown has some wonderful parting advice.

If you’re not a professional investor, don’t waste time and energy comparing yourself to the pros or to any other benchmark that is irrelevant to your future spending needs. At best, it will make you anxious and envious during the inevitable periods in which you’ll find yourself behind. At worst it will cause you to do things that are unnecessary and dangerous.


There is no reason to waste your time and energy and emotional capital comparing yourself to a benchmark that (a) doesn’t care about you, and (b) is irrelevant to your future spending needs.