Tiger Parenting a Tiger . . . and Failing Miserably

August 19, 2022

For over a year now on Open Insights, we’ve been writing about the how’s and the what’s of investing. How is the economy doing? What does the energy markets look like? What do we think the market will do in the coming days, weeks, months. For this week, however, we’re going to segue a bit and discuss something that’s related to investing, but slightly different. Something recently happened to this author as a parent, and after having some time to process it, I thought I’d share it in the hopes of helping others. So indulge me for a bit as I write about what I learned recently. We’ll call it the unintended consequences of tiger parenting . . . a tiger.

“She doesn’t take risks.”

Time stopped. It was like a movie scene, where the world closes in for the character. That instant where for just a moment all you hear are muffled voices and a slight ringing.

“The teacher says she doesn’t take risks.” My wife repeats.

“What do you mean?” I asked.

“She doesn’t raise her hand and only answers easy questions she knows the answers to.”

. . . right there. Ooooh, right there. That’s the moment, the moment you realize . . . you’re failing as a parent. You know it at the core of your heart. You’re utterly failing to raise a healthy person. You’ve known it though. You’ve seen her do her homework, the hours she spends to perfect every answer, every sentence in essays that didn’t matter all that much. Maybe it’s just a quirk of her Type A personality you reasoned. She’s a tiger, both in Zodiac sign and tenacity. She wants to win. She’s a perfectionist, it’s fine, you said to yourself. You notice it though. She’s in elementary school, and although part of you is proud of her perfectionism, the other part is also slightly concerned. Her more intuitive mother has already picked-up on it. She’s a teacher after all so she spots these things, but you shrugged it off.

It’ll be fine . . .

But then it really hit.

It won’t be.

“She doesn’t take risks.”

As money managers, we tend to see the world differently. It’s a world FILLED with possibilities. We’re constantly flipping a mental coin with one side showing risk, but the other side showing reward. We do it consciously and unconsciously, and we do it CONSTANTLY. We mentally play with it, we flip it, we twirl it, we consider it, and we weigh it. Sometimes the coin is overweighted on one side, and that shifts the possibility that a particular outcome will occur. The deviation allows us to place our bets when the odds are in our favor. Moreover, given enough experience, we learn how to flip the coins in such a way that we further tilt the odds in our favor (e.g., structuring trades with better risk/reward ratios, pair trades, etc.).

Much of risk taking is innate. You are who you are and even with education and experience, some people naturally have a higher penchant for taking risks than others. Nature dominates nurture here, but even so, you have to nurture what you have to preserve what could be. If you fail to take risks, if you shrink from taking risks, then your ability to even find and successfully flip those coins begin to decline dramatically. It’s a skill that’s never learned and never practiced. In time, what little ability that existed before is lost to atrophy and simply withers away.

The best investors, the most successful investors, see the world differently. They constantly look for opportunities in all aspects of their lives. Is something worth doing? Is something worth considering? What’s the payout? Is it asymmetrical vs. the risks involved? It’s all about maximizing the returns on opportunities where returns asymmetrically outweigh the risks.

But . . . if you don’t take risks . . . that calculus never happens and the opportunity never seized. What was a life to filled with immense possibilities and probabilities, suddenly diminishes. Like a rocket, omitting that calculus means failing to launch and failing to soar. As a person, you can never truly achieve or truly be satisfied if you don’t maximize your own potential. Never taking risks, even the seemingly outlandish ones that force you outside of your comfort zone, means a life’s potential cut-short. It means living a much smaller life. At worst, it means living a life that you’ll eventually regret. For readers who’ve never read our article about life’s regrets, we highly recommend that you peruse it.

No, we’re not talking about skydiving without a parachute risk, we’re talking about Monish Pabrai’s “heads I win, tails I don’t lose so much” type of risk taking. Even better? Tails I win ALOT type of bets. You know the ones, try out for the soccer team, enter the cooking competition . . . bet on oil when inventories are at decade lows and even if Iran were to come back via a new JCPOA 2.0 (doubtful), we’d likely continue to draw in 2023. (See what we did there? Psst, inventories still trending lower, and everything looks “fine” on the energy front, so keep reading.)

THOSE are the types of bets we’re talking about. Those are the risks kids and investors should be taking. You might not win all of the bets, but even if you lose, you won’t lose so much . . . and you’ll grow.

It’s also not just about opportunities. An inability to take risks also means an inability to cope with set-backs. What happens if her perfectionism leads to an inability to cope with failures? Middle school, high school, college, life? What happens to her resiliency if she can’t always achieve perfection? While a noble pursuit, it’s an impossible and pointless task. Even more alarmingly, successive disappointments while striving for a false goal can eventually lead to mental and cognitive issues.

No, this can’t be the way.

We have to change.

I have to change.

It’s all my fault really. It’s my fault because in my pursuit for high achievement for our kids, I distorted the process. I placed an undue pressure/burden on them to achieve because selfishly, it reflects on us. It’s vanity plain and simple.

Get good grades, done, but at what cost?

“Show me the incentive and I will show you the outcome.” Charlie Munger

Instead of emphasizing THE PROCESS (set high goals, study hard, work hard, take risks, fail well, learn and try again) we (or I) simplified and short-cutted the process. I shifted the focus away from the process and over-emphasized the results, which led to the unintended consequences. I celebrated the achievements, but forgot to appreciate the hard work, the effort and determination, the hours spent and the tears shed learning from all the little mistakes.

The parallels to investing and portfolio management are numerous and still I forgot. Look at my results, look at my outperformance, look how grand they are . . but how was that done and why are the time periods shown only of the recent years? Didn’t the years of underperformance, the years of “the grind” lead to today . . . and yet we omit them as if it was something shameful.

It’s similar to the college admission scandal that we talked about 4 years ago, how the overemphasis on the destination means that you can get lost on the way.

It’s too hard though. I’m too busy or tired to have that conversation. I’m already mansplaining as it is. So I simply said “get good grades,” which then morphed conversationally into “hmm you got 9 out of 10, what happened on this last one?” (jerk) that then morphed into “you got 39 out of 40, why didn’t you show me your test?” which is when she fully internalized the thought that “I have to be perfect and anything less isn’t acceptable.”

I get it James Earl Jones . . . I get it.

So you see? It’s all a lesson in unintended consequences and bad processes. In my desire to raise a higher achiever, something she already was, I’d inadvertently or negligently foot faulted and was now raising a girl who’d take fewer risks in life. She’s on a path to ticking and tie-ing EVERYTHING until it was all perfect.

DEAR GOD . . . I’M RAISING THE PERFECT ACCOUNTANT!

Ah heck naaaah . . .

“Take risks, fail, fail well, and fail SPECTACULARLY . . . we’ll be here to catch you.”

“Take risks . . . take more risks, fail and learn.”

“Take risks . . . fail, faaaaaiiiil like Daddy.”

That’s what we began saying. That’s what I began saying to her.

Did you make a mistake? Good, gooood, more mistakes, make moooore mistakes. We love mistakes. Mistakes equal wrinkles in the brain when you learn. I make tons of them everyday. All day long.

“Um Daddy, you’re a dodo head, I don’t want to fail like you.”

“Do it . . . doooo it.”

Sure hope this works.

The “As” continued to flow, but the risk taking? Not sure. The teacher saw small glimmers of hope, a raised hand here, a hesitant answer there.

Months passed.

Then one day . . .

“Daddy guess what, guess what?” as she ran to me wild-eyed when I picked her up at school.

“What? What?”

“I tried out to SING a solo part at graduation!”

“WHAATT??? WHATT?? YOU’RE CRAZY!!” (my full eloquence on display)

“You told me to take risks!”

“I mean like . . . raise your hand . . . that’s CRAZY RISKS!!"

. . . and the next day . . . she got it,

. . . and the next week . . . she sang,

. . . and it was WONDERFUL.

Her mom put it best as we were driving and said . . .

“We’re always proud of you, but what I’m most proud of is that you took the chance and you tried. Even if you hadn’t been chosen, you tried. That was the most . . . I’ve never been more proud of you than what you did.”

She sang, she embraced the risk.

We’re off to middle school this week, off to new adventures, new friends to meet, and life’s endless possibilities to explore. So take risks. Take little ones, take big ones. Take crazy, mind blowing and asymmetrically rewarding risks, and take them as they come. Take ‘em all.

Fail well and fail spectacularly kiddo . . . we’ll be here to catch-you.

And if an 11 year old can do it . . . so can you.

Thanks for indulging this dad.

Please hit the “like” button below if you enjoyed reading the article, thank you.