Brenda Vingiello, Sand Hill’s Chief Investment Officer, joined Squawk Box to discuss her thoughts on the latest market trends and market outlook for 2025. This
The Stockdale Paradox
Published Date : April 28, 2020
April 28, 2020
In the book Good to Great, author Jim Collins coined the term Stockdale Paradox to describe a powerful psychological duality that seems to be shared by many successful business management teams in dealing with adversity. The name refers to Admiral James Stockdale, who was the highest-ranking United States military officer at the “Hanoi Hilton” POW camp during the height of the Vietnam War. He later gained additional fame as Ross Perot’s running mate during the 1992 presidential campaign.
As the book states, Stockdale was “tortured over twenty times during his eight-year imprisonment, and [he] lived out the war without any prisoner’s rights, no set release date, and no certainty as to whether he could even survive to see his family again.” Essentially, he had no control over his extremely difficult situation except for his own emotions and behavior. And yet, he never doubted that he would get out. In fact, he never lost faith that he would prevail in the end. He also instituted rules and methods that would help other people deal with torture and uncertainty. However, during an interview for the book, the author asked, “Who didn’t make it out?” “Oh, that’s easy,” said Stockdale, “The optimists.” Hence the Paradox.
Indeed, the (wide-eyed) optimists were the ones who thought that they would be released soon, or by some certain date. Then that date would come, and they would still be there. They then would anticipate another release date, and then that date would come and go, and so on; until eventually they would give up and perish from a broken heart. As Stockdale is quoted, “This is a very important lesson. You must never confuse faith that you will prevail in the end—which you can never afford to lose—with the discipline to confront the most brutal facts of your current reality, whatever they might be.”
Every company that achieves greatness faced significant adversity along the way, too; and in every case, the management teams responded in this kind of paradoxical fashion. On the one hand, they stoically accepted the brutal facts of (their) reality; but on the other hand, they maintained an unwavering faith in the endgame and a commitment to prevail despite the brutal facts. It seems that there are important lessons here for individuals in general and long-term investors in particular. In life, we experience setbacks and disappointments, and sometimes even crushing events such as accidents, disease, and the loss of a loved one—and even financial failure and loss of wealth. What separates people, and their respective outcomes, is how they deal with such inevitable difficulties. The key elements of greatness are deceptively simple and straightforward. Successful leaders (or investors) are able to strip away noise and clutter and focus on the few things that have the greatest impact. They are able to do so because they operate from both sides of the Stockdale Paradox, never letting one side overshadow the other. Additionally, they focus on gaining ground as an important part of dealing with (and overcoming) problems or challenges of all kinds, and this usually requires dogged determination. It also involves discipline (committing to the process), patience (committing to the process one step at a time), and perseverance (committing to the process one step at a time over the long haul). Our investment program is based on these same crucial elements that are necessary for overcoming adversity and achieving long-term success.
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All video presentations discuss certain investment products and/or securities and are being provided for informational purposes only, and should not be considered, and is not, investment, financial planning, tax or legal advice; nor is it a recommendation to buy or sell any securities. Investing in securities involves varying degrees of risk, and there can be no assurance that any specific investment will be profitable or suitable for a particular client’s financial situation or risk tolerance. Past performance is not a guarantee of future returns. Individual performance results will vary. The opinions expressed in the video reflect Sand Hill Global Advisor’s (“SHGA”) or Brenda Vingiello’s (as applicable) views as of the date of the video. Such views are subject to change at any point without notice. Any comments, opinions, or recommendations made by any host or other guest not affiliated with SHGA in this video do not necessarily reflect the views of SHGA, and non-SHGA persons appearing in this video do not fall under the supervisory purview of SHGA. You should not treat any opinion expressed by SHGA or Ms. Vingiello as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of general opinion. Nothing presented herein is or is intended to constitute investment advice, and no investment decision should be made based solely on any information provided on this video. There is a risk of loss from an investment in securities, including the risk of loss of principal. Neither SHGA nor Ms. Vingiello guarantees any specific outcome or profit. Any forward-looking statements or forecasts contained in the video are based on assumptions and actual results may vary from any such statements or forecasts. SHGA or one of its employees may have a position in the securities discussed and may purchase or sell such securities from time to time. Some of the information in this video has been obtained from third party sources. While SHGA believes such third-party information is reliable, SHGA does not guarantee its accuracy, timeliness or completeness. SHGA encourages you to consult with a professional financial advisor prior to making any investment decision.
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