Are You Playing The Wrong Game?

An easy way to do numbers on the ol’ Tweeter app is to say something like this.

“They need to teach personal finance/taxes/cooking/nutrition/whatever else in school. We’d be so much better off!”

These types of posts irritate me for a few different reasons:

Still, I actually agree with the conclusion. We should incorporate more of that stuff into school, especially to the students who take the more academic route. I say this fully aware that a lot of it won’t stick. Teachers spend time on so much other stuff that is quickly forgotten, so we might as well do the same with personal finance or counting calories — in the hopes that at least some of it is retained.

There’s one skill that not only isn’t being taught in schools, but as far as I can tell it isn’t being taught at all. This is something that I believe explains a lot of why I got ahead and why I was able to be successful, and it’s something that isn’t very hard to understand at all. If I do my job right in the next 1,500 words or so, you’ll be able to grasp it well enough to not only apply it to your life, but to also explain it to your kids or grandkids.

You can even use it — like I have — to help become a more successful investor.

Let’s get started.

I don’t have a lot of experience asking teens what they want to do when they grow up, because I hated that question when I was 16. So I default to bad dad jokes instead, and leave the serious discussion to parents and teachers.

I hated that question because — like a lot of kids that age — I didn’t have the faintest idea what I wanted to be. I had no idea what most careers consisted of, little clue whether I’d like things or not, and was completely lost when considering how vague college degrees would translate into meaningful employment.

There was a meeting with the guidance counselor back in 1999 or 2000. I was asked my interests, and I told her sports and finance. I was presented with three paths, which included:

I had considered the first two before the meeting, but dismissed both. I hated high school, the last thing I wanted was to spend the rest of my life there. And even with the limited resources we had in the late 1990s, I still knew that sports broadcaster was a low paid and ridiculously competitive profession. That left the last option.

And so I asked questions. What kind of job did that qualify me for? What would I do all day? She didn’t have a satisfactory answer for any of them. “You’d do, you know, stock market things. Finance things. Accounting. That kind of stuff.”

I left the meeting more frustrated than when I first entered it. The adults around me trusted that it would all work out if I went to university, but I needed more certainty. I wasn’t ready to take that leap.

And so I ended up in the grocery business. I was attracted to it because I didn’t need any additional schooling to start, the store was only about a 20 minute walk away, and there was an easy path to making about 50% higher than minimum wage in just a year or two. That would give me immediate capital that I could invest into real estate. I’d live at home and use my passive income to get ahead.

I defaulted into the grocery business and ended up spending a lot of my career there. It was surprisingly a good fit. I had some success, got promoted, and ended up in management. I got good enough at it I’d put my abilities up against most anybody’s.

Purely by accident I ended up in a game that was a good fit for me, which is how I found career success despite some not so smart moves. I job hopped too much, and not in the intelligent way that resulted in promotions. I mostly did it because I was bored.

When picking a career, I was told to pick what interested me or what I liked to do.

“Do something you love and you’ll never work a day in your life.”

With the benefit of 25 years of hindsight, I now believe this is terrible advice. Youth should pick their careers strategically, looking for a combination of:

As long as the decision is pretty good, success should follow. Because so much of life is actually about picking the right game. Don’t get me wrong; you still have to execute. But executing is much easier when the competition is weaker.

I did pretty good with my game selection without even thinking about it. Grocery involves things like basic math skills, improvising solutions to problems, and people skills — all qualities I do better than the average bear. Competition is also weak; a lot of employees tend to implode in a year or two. The good ones will stay for a few years and then move on.

Compare that to another job I had at one point — a real estate agent. I was possibly the worst real estate agent imaginable. I was too shy to cold call anybody. I hated rejection, so I put myself in a position where I’d never have to deal with those unpleasant feelings. I was too cheap to spend any money on marketing, and then too stubborn to take the advice of folks who were successful at it. I thought I was somehow above asking people for their business.

The things I was good at — like dealing with people and helping out investors — were nice, but they only ensured I didn’t starve. After a couple lackluster years I left the business, and my only regret wasn’t doing so sooner.

I chose the wrong game, and I paid the price. I retreated back to a grocery adjacent business and continued to have success there.

Just like with careers, the same concept applies to investing.

When I first started getting serious about the stock market in the early 2010s, I embraced a deep value approach. I emulated Buffett — especially his early days — and wanted to be just like him. So I went with a cigar butt approach.

And because I believed there just weren’t that many good opportunities, I concentrated the portfolio in my best ideas.

It was a disaster. The market roared higher and I was left behind. I had a few successes, more than a few misses, and I lagged most everybody.

I kept this up for years before seeing the light. Thank the good lord my real estate investments performed well.

What I realize now is I was playing the wrong game. I wasn’t good at deep value investing. I did much better when I focused on higher quality dividend growers.

I used to think my edge was analytical. I would research these stocks deeply, and I was convinced I knew more than the market. The problem was I was crummy at odds. I’d gloss over things that would eventually impact the company in a big way, convinced they weren’t that big of a deal. The problems I thought only had a 20% chance of hitting actually had a 60% or 80% chance.

Cigar butt investing also doesn’t really reward patience. One reason I did well in real estate was because I was a patient buyer. I looked at a lot of properties and only bought the ones that were most consistent with my plan. Then I held them for a long time, which had the added benefit of increasing my return on investment as rents increased.

A good piece of real estate benefits from a long-term approach. A deep value stock doesn’t. You get your one last puff and then you sell that bad boy.

It took too long, but I slowly figured out that dividend investing was the game for me. It meshes really well with the qualities that I’m good at. I’m patient, and I’m willing to wait years for an investment to work. Tom Petty said the waiting is the hardest part, but I don’t think it’s so bad when I’m getting paid to do so.

I’m also not a huge risk taker. I’m immediately skeptical when someone tells me about some sexy new technology that’s going to change the world. I can’t analyze such a world. I have no idea how it’s going to shake out. But I can analyze boring industries that don’t change much, and I think I’m pretty good at seeing when the market overreacts to short-term issues.

Now that I’ve found the right game for me, I’m much more focused on making it as simple as possible. I get into trouble when I make investing too complicated. The I’d-like-a-challenge part of my brain loves complex situations where if only a company does A, B, and C, then I make money. The logic part of my brain realizes such a situation is nothing more than a parlay, each with its own set of odds. I suck at these situations, so I retreat to my own game.

A couple years ago I wrote about Norm, a farmer I know who did a lot of financial things wrong. He was a sucker for a good sales pitch, and so he fell for all sorts of goofy schemes over the years. Most just cost him some time, but there were a few that took sizable chunks from his wallet.

Despite these Ls, Norm still ended up with what I’d estimate as an eight-figure net worth. The man killed it.

Without realizing it, Norm nailed game selection. He knew farming and continued to buy nearby land. He did this over and over again for about 40 years, and now he’s got a hell of a legacy to pass onto his children.

But what Norm really taught me is getting wealthy isn’t really that complicated. It’s a simple strategy of:

The rest really is details.

And so, I started looking at things in a slightly different way. I want to emulate the dumbest guys I know who got rich doing simple things. Screw reinventing the wheel or doing something novel and unique; I’m copying shit that works so well that even a local idiot can pull it off. That’s my kind of game selection.

I’ve been doing it for a little while now, and probably the biggest lesson it teaches you is humility. You quickly realize those guys aren’t idiots at all, that they’re masters at finding simple things, analyzing them well, and being patient enough for compounding to do its thing. They’ve found the right game for them, and they’re executing well.

Once again, game selection rules everything.

Life can be complicated or simple. It’s really your choice.

The longer I think about these things, the more I value simplicity. Now I focus on nailing the important things and ignoring the rest.

Game selection rules a lot around me. This website is transitioning from having a premium tier to being 100% free for everyone (look for more deets in October), and a big reason is because I’ve realized the paid newsletter game is the wrong one for me. I’m going to write and share for the love of the craft, and to try and give back to a community that has been so good to me. I’ll leave the overly promotional stuff that you need to do to succeed in this business to everyone else. I’m happy to have a nice little group to kick ideas off of. That’s the best game for me.

If I had one piece of advice for the kids, it’s this. When making big decisions, think about game selection. I truly believe it’ll help.