Resilience in Various Facets of Life

Brent Beshore’s firm Permanent Equity sends out a weekly newsletter. In a recent edition he wrote about the concept of resilience. He references the Texas winter storm in February which devastated a lot of people. Ashley’s parents were here in Ohio after traveling in from Texas to help us get started as first-time parents, so we got to hear a lot of sad and scary stories of what people were enduring with the extreme. The whole idea of the tradeoffs between resilience and efficiency got a lot of discussion early in the pandemic. Highly leveraged companies that had their business dramatically impacted by the lockdowns were in a world of hurt. Even our domestic supply chain that outsourced so much for cost savings was unable to procure or produce the necessary PPE in the volume required.

This got me thinking in what other facets of life is resilience important, but requires a tradeoff with something else, making the decision of what to optimize for and the right balance a difficult one? Here are a few I came up with…

· Finances and Investments – There’s a definite tradeoff between risk and reward. If you have a long enough time horizon and want the highest returns possible, it goes to reason that you should invest all the money you have in a very aggressive manner. Having six months of emergency savings is prudent and good from a resilience standpoint, but will generally drag down overall returns. Investing in what Ray Dalio refers to as an “All Weather Portfolio” smooths out the peaks and valleys, but also has a lower projected return than aggressively piling into high growth stocks or venture capital.

· Short-term vs. Long-term Decisions in Business – Often in business trying to maximize profits in the current month or quarter can come at the expense of long-term viability. Just this past week I was talking with several members of my team about the training investment required to continue to build our controls service competency within our technician workforce. While undoubtedly this will make us a more resilient and well-rounded service department in the future, it comes at short-term cost. There are countless other examples like this within business where these decisions regarding trade-offs are difficult to make.

· Health – In the past 3.5 years I’ve had major open heart surgery to replace a bicuspid aortic valve and an aortic aneurysm, while also having minor back surgery related to a herniated disc. I’m currently in good health and feel great, so there’s a temptation when I go to the gym to go all out and to lift heavy weight and to optimize for how I think I should look. Instead I try to heed the doctor’s advice and you’ll sometimes find me doing strange looking lower back and core strengthening exercises to build resilience to prevent future injuries or health issues.

· Relationships – Early in a new relationship there are often lots of fun times and new experiences. It’s tempting to extrapolate that out and think that’s what life will be like together indefinitely. This is rarely the case, and building a resilient relationship requires having difficult conversations that cover tough topics, and focusing on basic things like respect, communication, and empathy.

These are just a few areas of life where it seems to me that resilience is critical, but also comes with a trade-off. I’d love to hear any others you can think of!

Here are some recommendations from the last 2 weeks:

· Book - Ender's Game by Orson Scott Card – Most of my reading is nonfiction and it had been a long time since I’d read a fiction book. While taking a week mostly off of work for paternity leave I went searching for a good fiction book and stumbled across Ender’s Game. I really enjoyed this book, I found it highly entertaining but also insightful with lessons related to leadership, innovation, and change management. I’ve tried starting several highly regarded science fiction novels and had a hard time getting into them so if that sounds like you’re in the mood to try one again, I’d definitely suggest this book.

· Movie - No Escape – This is on Netflix right now. I was surprised I hadn’t heard of it as it has Owen Wilson, Lake Bell, and Pierce Brosnan in it. Not the deepest plot line ever, but if you’re looking for a relatively short movie with nonstop, high intensity action then check this one out.

· Article - The Beginning of the End by Packy McCormick – This article is about the various food delivery services along with the dynamics of the current situation, and some predictions on where it might go from here. I enjoy material like this that breaks down the economics of something we’re all familiar with and considers some of the possible second and third-order effects. I also think it helps build general business acumen and an understanding of how various values chains work.

· Podcast Episode - Jeremy Grantham with Patrick O'Shaugnessy on Invest Like the Best – Despite not agreeing with all the conclusions drawn by Grantham, I found him captivating to listen to and clearly very well studied. Anyone who closely follows the stock market or is an active investor should check this episode out.

· Quote – It takes considerable knowledge just to know the extent of your own ignorance. by Thomas Sowell