Setting Goals, Avoiding Investing Mistakes, Innovating

Gold Coins and plant isolated on white background

Objectives are the goals we set for ourselves. If you plan to reap high yields from your investments, you should by all means learn to set goals right. We chase them, day by day, reaching some from time to time, to our great joy. But also missing many of them, to our great sorrow. And as soon as one goal is achieved, a new one arises immediately, like the eternal phoenix rising from the ashes.

There is a variety of objectives – bold, utopian, unrealistic. But on a closer look, it is appropriate to question about them: which are really motivating? In other words, what are the objectives that drive us actually to give our 110% to achieve it, always with the conviction that we will get there even if it’s difficult, not thinking for a second to give up even if the bar is high?

It is a truly motivating goal that we reach easiest, as is proved by a study entitled Goals that addresses objectives as reference points in marathon running: a novel test of reference-dependence. A study signed by Alex Markle, professor of management at the Gabelli School of Business in New York (United States); George Wu, professor of behavioral science at the Booth School of Business in Chicago (United States), assisted by his student Rebecca White; and Aaron Sackett, a marketing professor at the School of Commerce Opus in Minneapolis (USA).

The four researchers asked 1,633 experienced marathon runners to lend themselves to a little experiment. It was just to answer detailed questionnaires before and after a major marathon, knowing that it had to be among one of the 20 most famous marathons in the United States (New York Marathon, Marathon Boston, Chicago Marathon, etc.). Unbeknownst to them, the participants in the experiment were placed in different conditions:

– No question about personal goals. For some, no question they were asked in relation to their goals for the race in question.

– Only one question on personal goals. For others, they were asked to indicate once their goals for the race in question, two weeks before departure. Objectives in terms of time (ex.: “My goal is to cross the 42.2 km in less than 2h20min, which is my personal best”), but not only (ex.: “My goal is to rank myself among the first 200 “).

– Two questions about personal goals. For others, they were asked twice to indicate their goals for the race in question: once six weeks before this, and again two weeks before departure.

The questionnaires were designed to glean as much information as possible about the expectations of marathoners and satisfaction – or disappointment – that would result from their performance. And so, to analyze how best to motivate to achieve their goals.

The results were very edifying, as you will soon realize:

The longer a goal has been an ambition, the greater is the fear of failure. However, it is not the fear that makes the performance better. Therefore, it is destructive to engage too much ambition.

Several parallel objectives are beneficial. Having several goals at once removes greater satisfaction efforts. For example, a runner will be satisfied to have run a marathon in the range of time that he or she has planned from the start, and he or she will be even more satisfied if, at the same time, they beat their best personal results, as they have hoped before embarking on the race.

An emotion always weaker than anticipated. Whether one of the objectives is reached or not, the satisfaction – or disappointment – derived from the experience is still less than originally expected. A sense of accomplishment prevails all the emotions, and eventually a new, even more ambitious goal is set in case of success. Idem, in case of failure, one recovers quicker than he or she has imagined a priori.

What can we learn from this?

Setting a really motivating goal should, in reality, is setting several parallel goals. How? Inspired by the method of the best marathon runners, who say before departure not only that they have to run the 42.2 kilometers, but that they aspire to beat their personal record at the same time. Note that, to know where they stand in relation to their ultimate goals, champions also set intermediate goals (15km, 20km, 25km, etc.), as steps indicating whether their efforts are adequate or not.

Now, how to go about securing good parallel objectives? That is to say, which ones are neither too high nor too low? “These goals must be realistic and bold at the same time,” the researchers said in their study. And to balance these two characteristics, we must take into account the satisfaction that we will reap if we ever reach our objectives: realistic goal is the one that is in line with our past performance; and it is a bold goal that will provide us, if reached, an immense joy.

That’s it. The best motivation is based on the right balance between realism and daring. It’s as simple as that. Incidentally, the French playwright Prosper Jolyot Crebillon said in his lay Catiline: “The success has always been a child of audacity.”

Investing mistakes to avoid

To make your goal of accruing greater benefits from investment you should work out a plan be disciplined about sticking to it. Markets of new heights and yields of some past five years are enough to make many stock investors dizzy. The last time the markets were in this situation goes back to the late 1990s, shortly before the tech bubble burst. Of course, the two periods are not the same. At the time, the level of speculation over shares related directly or indirectly to the Internet was exceptional. Nevertheless, we find ourselves today in a situation similar to that of 1999: the stock deals are rarer.

So let’s deal on the common mistakes made in the late 1990s not to repeat them this time.

  1. To derogate from investment philosophy. For example, a philosophy may be to buy companies financially sound, profitable and growing at a reasonable price. However, at the time some investors were left completely spellbound by techno wave, leaving thus their investment approach of previous years.
  2. Investing in investment grade that can be called the “value traps”. Where are we wandered into buying investment grade. At the time, the shares of excellent companies seemed too expensive. It was thus tempting to lower the selection criteria to purchase securities of companies that seemed cheap on paper but were not worth very much. Example: International Aqua Foods, a fish farm. This is called ‘value traps’ securities because they just tend to remain cheap.
  3. Investing in too complex enterprises like Semi-Tech. For me, unfortunately I remember it very well. This sprawling conglomerate was active in many disparate areas, from sound systems for Singer sewing machines. Its structure was particularly complex, making it very difficult for analysis and randomized evaluation.
  4. Ignoring the baseline scenario. When we buy a share, we always note the reasons why we see this as a purchase. Such a scenario does not have to be long or complicated – often on one line or two. When markets are favorable, there is a tendency to forget the reasons that made you buy securities.
  5. Not keeping winning stocks. If buying investment shares because they seem relatively inexpensive is a mistake, not selling high-quality securities because they are a bit expensive is equally important. As long as a quality share is our base case and its assessment is not excessive, it is important to keep it. This is for example what you should do with such shares as Colgate or Visa.

The investment is that beauty which is constantly improving with age. But need to know to learn from past mistakes.

How to innovate supremely?

Make your investing solutions bold and novel will get you still closer to your ultimate goals. Innovate supremely in your investing, or engaging in alternative investment, means to have successful feat to find an idea that no one ever had before. A revolutionary idea. An idea, in other words, that is likely to change the world, at least to change that in the environment in which you work.

The unstoppable trick to innovate is supremely simple, says Pollack: just use the analogy. That is to say, he should seek a similarity between two different things that a priori have nothing to do together. And so, to identify the points of resemblance between two separate entities, and to use it as a starting point to see each entity with a fresh eye, knowing that one can bring a fresh look to find a really new idea, if not supreme.

The process seems complicated to you? Do not worry, it’s perfectly normal, since we’re not used to think that inventing is easy, and that is exactly why it is so valued. Hence the importance of the four rules issued by Mr. Pollack.

  1. Multiply the analogies to be able one day to make a really good one

Multiply the analogies to be able one day to make a really good one

There are real analogies, but also false. The trouble is that when we make analogies, we have the tendency to find above, all false, ones. Consider an example: you are driving on a winding road, and by association of ideas it reminds you of another road, just as curvy, you took last summer in Italy. It is not an analogy, but a mere likeness. However, if you are driving on a winding road and if it makes you think of a snake, then there is a real analogy: you have identified a similarity between two different things.

How to make real analogies, not false? By exercise. By multiplying the analogies while being careful in distinguishing between true and false.

“For centuries, humans have tried to fly through the air imitating the flapping wings of birds, says Pollack. In vain, because it was not there a real analogy. One day the Wright Brothers noted that there were similarities between what airmen were trying to accomplish and… the bike!

“Indeed, the plane was an unstable cycling gear, which required a mastery of balance and aerodynamics.” And without the energy to move forward it does not function. Inspired by these points of resemblance which until then had not come to anyone’s mind, Wright Brothers entered into history at Kitty Hawk on December 17, 1903.

  1. Explore several analogies, distrusting the most attractive ones

“It often happens that analogy is attractive, to the point to say we found a gem that will allow us to innovate supremely,” says Pollack. But better be careful. For the most seductive analogy is rarely the best that may lead us to true innovation.

“Hence the need to increase the real analogies, from the time when we find a good one. Take Charles Darwin, who developed his theory of evolution from not one, but two analogies.

“The first stemmed from a parallel analogy between geology and biology. Darwin noted that a stream was able to totally dig a canyon, if we gave it time and if the ground was prepared for it. And he said it could be the same for a plant or animal that, over generations, could possibly change its shape and its faculties to best adapt to its environment.

As for the second analogy, Darwin received a parallel between the way the farmers were conducting selections of species of animals and plants and how nature conducted a “natural selection” in the wild. It is by mixing the two analogies he arrived at his theory that changed our understanding of the living.

  1. Prick ever your curiosity

Steve Jobs

“The art of the analogy stems largely from the reclassification of information, especially information drawn from unusual sources for us. A shining example will help you understand how to go specifically achieve this…”

“We attributed the invention of the assembly line at Henry Ford during the production of his famous Model T. In fact, the inventor of the assembly line is one of its employees’, a young mechanic named Bill Klann. He had visited a whaling factory and had noted that workers are not distributed carcasses, but passed carcasses from one to another, fulfilling a specific task, always the same. And he had an idea that his job at Ford could be inspired by reversing maneuver: instead of disassembling a carcass in turn, they could assemble a car in turns.

Proud of his analogy, he went to talk to his boss, who sent him packing! The boss did not understand his idea. Bill Klann nonetheless managed to convince colleagues of the relevance of his idea, and proposed an experiment to its senior management: as the result, instead of 12 hours to make a car (standard technique), it took him only 90 minutes (line work)!

  1. Simplify, simplify, simplify

“Steve Jobs used to say: “Simplicity is the ultimate sophistication,” cites Mr. Pollack. He meant that you should always try to oversimplify to hope to achieve excellence. Analogies operate on the same principle: they help make clear what is yet initially complex. Moreover, it is by this that we recognize the good analogies: they are simple, but never simplistic.”

The author illustrates his Shortcut with a concrete example from the history of Apple. “It is in discovering the Xerox Alto designed in 1973 by Charles Thacker and researchers from Xerox Palo Alto Research Center – often presented as one of the first desktops – that Steve Jobs had the idea of democratizing the computer staff. He had seen the prototype object that may be of interest to millions of people and that the inventors of the Xerox Alto did not imagine for a second. He had said that simplifying the subject, particularly its design, one can make it appeal to a broad consumer market. The rest is history…

That’s it. You now know how to go about innovating supremely. Just respect the rules established by John Pollack, a former journalist turned speechwriter for President Bill Clinton and communications consultant on innovation with large companies. And thus, make it a habit to better master the art of analogy. It’s as simple as that.

By the way, the French writer Victor Hugo said in Ocean Prose: “Knowledge, thinking, dreaming. Everything is there.”

User Rating: 5.0 (1 votes)
  • Miley

    It is naïve to believe that investing today is anything like it used to be back in
    the day. One point to back up what is say is that Nasdaq is composed of
    entirely brand new companies at this time and age, and
    they are engaging quite different technologies. So for all the ill-boders out
    there, I’d say, don’t panic.