What Surfing Taught Me About Investing
It was over a year ago on a wintery New York day. I was all bundled up, ready to face the freezing weather. I was listening to an audiobook on my daily commute — Yvon Chouinard’s – “Let my people go surfing.” The book discussed much more than surfing, but surfing seemed like a pleasant topic to read about on a chilly day. At the time, I had never surfed in my life, and I had no way of knowing that later that year, I’ll be chasing waves and learning something new about myself, and investing in the process!
Yvon Chouinard is a legendary climber, businessman, environmentalist, and founder of Patagonia, Inc. – an American outdoor clothing company. Patagonia, known for its environmental focus, is a privately held company that seems to live by the motto that small is beautiful. Their clothing is pricey, but it’s meant to last. Despite great success, Chouinard still calls himself a reluctant businessman.
As the title of the book implies, Chouinard also has a unique take on the work and life balance. It’s not unexpected since, in many fields, he’s often been ahead of his time. When surfing conditions are good, he’d rather see his employees catching waves than sitting at the desk. He wants them to be excited about work, and if the ocean is calling them, there is no reason to stop them.
With the same awe as Captain Cook some three centuries ago, I admired surfers from afar on many occasions. They seem to have harnessed an unruly force and have fun with it. Despite my affinity for the ocean, until recently, I had never tried surfing. I spent a fair amount of time sailing and scuba diving. I enjoy both sides of the surface of the sea, but I never knew the feeling of gliding on it.
Not long ago, Megan and I took the leap and tried surfing. From the first session, we enjoyed every moment of it. It felt more like permission to learn rather than a claim of any proficiency of the sport. The more we surfed, though, the more surfing reminded me of investing, and the more investing felt like surfing.
Surfing is also one of the very few things we have been able to do without wearing face masks and using hand sanitizer. As long as we don’t break any local curfews while keeping an eye on the tides and rip currents, we are in the clear. It’s also been a perfect activity to social distance in the COVID era, or so I thought until local authorities banned it not long ago – fortunately only temporarily.
Charlie Munger (Warren Buffett’s business partner and a legendary investor) often shares how we should look for inspiration and mental models in other fields outside of investing. I’m not sure if he meant surfing. I’m finding out, though, how many of my investor friends caught the surfing bug, too. I don’t think all investors are surfers or vice versa, but somehow the two disciplines have a lot more in common than one would think!
The one thing that I learned at the very beginning of our surfing experience was that patience is key. Sets of good waves come in intervals, and it pays to wait for the right wave. The frequency of good waves depends on the tides, the weather, the winds, the particular break, or even the time of the year. The opportunities in investing come and go, and at times there might be hardly anything new available at attractive prices. In moments like that, the best we can do is keep waiting.
Surfers often say that surfing should be called paddling. An average surfing session includes 98% paddling, 2% surfing. In investing, we spend 98% of time researching, reading, learning, and 2% actually buying or selling. With the chest down on the board, the surfer works hard with both arms getting the board to move. The surfer paddles from the shore to the deeper water. He or she might also paddle around in search of a better position to catch the next wave.
It takes time and experience to be able to read the waves. There are no shortcuts here. Each surfer has to watch and commit to memory thousands of waves. Only then can one tell if it’s a good surfable wave and where the right position might be to catch it. This is no different than my early years as an analyst. I would either sit and read or join every possible meeting hosted by any of the senior analysts or portfolio managers. I instinctively knew that I had to see a thousand companies before I start to notice the patterns. A surfer never stops watching and memorizing the waves, and an investor keeps learning about companies in his or her investment universe.
There is a beginner’s luck in surfing as much as it exists in investing. During one of our early sessions, I happened to be at the right spot and the right time, and with a disproportionately little effort, I caught a spectacular ride or two. The ocean quickly reminded me that I’m a total newbie, and the following set of waves would wash me off the board or flip me upside down with no hesitation. Investing can do it to you, too. I often mention to my audiences how it pays to lose money on the first investment. I’d rather make small mistakes early on. It’s cheaper to learn that way and less painful while surfing!
As in investing, we can make mistakes; even the experienced surfers misjudge the waves. It takes experience to gracefully ditch a wave without falling off the board. It’s easier said than done. In investing, even with experience, research, and discipline, poor investment choices will happen. We often write about it and explain how you can’t eliminate all mistakes from your investment process. You can, though, minimize the damage done by any particular investment. When a well-chosen stock pick turns sour, it pays to sell quickly and move on. It saves money, time, and a few sleepless nights.
Every surfer learns about the infamous whitewash. It’s the area closer to the beach where the waves break. That’s where a gentle ripple turns into a powerful beast that will wash you off the board and likely drag you back closer to the shallows. For some reason, this experience reminds me of the times when your particular investment, whole portfolio, or investment style is temporarily out of favor. It takes persistence and stamina to keep paddling. There is no surfing without the “purgatory” of a whitewash, and there is no investing without the times when your ideas and convictions get tested. If anything, both investing and surfing taught me never to give up and always keep going.
When I talk to audiences around the world, I like to ask who has ever owned a stock and made money holding it. I know that anyone who has seen their hundred dollars turn into two is hooked for life. The sensation of successfully catching a wave on a surfboard can be likened to the excitement of riding a bicycle for the first time. A moment earlier, you might have thought it’s impossible, and a moment later, you wonder why it took you any time at all to figure it out. The moment though, when you do catch and ride a wave, changes everything. A surfer is willing to wait forever, paddle for almost as long, only to get back up and surf again. Investors are no different. We are willing to put up with a lot and get tested relentlessly only to find that next promising opportunity.
Furthermore, surfers believe that surfing is not just a sport; it’s a way of life. To me, investing is not just a job; it’s more of a calling; it’s something I would do even if I had all the money in the world. There are many investors whose wealth exceeds anything they could possibly spend in a lifetime, yet they still keep at it. I love reading, learning, making sense of the world around me. I also believe that as much as little replaces the excitement of catching a wave, little can replace the thrill of finding an investment opportunity. I call it a treasure hunt for ideas.
Both in investing and surfing – you never stop learning, and ignorance can be dangerous. Waves are a wild, unpredictable, and powerful phenomenon. They can give you an unforgettable ride to the shore or toss you around like a feather. Investments are no different; they can make you rich and take it all away. It pays to respect the forces we are dealing with.
Why are there so many surfers among investors? I think we are already patient; we know it takes time to learn anything worth pursuing, we got humbled by our investment mistakes, and we see surfing as a practice that further reinforces our instincts. If that wasn’t enough, surfing is such an incredibly absorbing activity that I can’t possibly think about anything other than the wave right in front. I don’t know of any better practice of being in the moment and clearing your mind. Surfing has become my secret advantage. You might not know how many ideas came to me right after a surfing session. I’m convinced that when Yvon Chouinard wrote “Let my people go surfing,” he was on to something! I want to think that surfing makes me a better investor, and I might be a better surfer because I’m an investor.
Let’s keep paddling, my friends; better waves and better investment opportunities are ahead!
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