On a recent episode of Hidden Brain, host Shankar Vedantam discusses a book byAlison Gopnik called The Gardener and the Carpenter. Alison uses an analogy between gardeners and carpenters to explain modern approaches to parenting.
Carpenters have the ability to make their workshops into an ideal creation space. They control many variables: humidity, temperature, and work surface. Carpenters also have the ability to get incredibly precise with their building diagrams and measurements. Messiness and variability are their worst enemies. They have the power to transform a block of wood into a chair, and can tell you step by step how it will happen beforehand. The carpenter shapes things entirely according to their own will.
Gardeners control far less of their creation process. Messiness and variability are their reality. The best they can do is create conditions that give their plants the highest possible chance of flourishing. So many variables of gardening are uncontrollable: temperature, precipitation, animals, soil type, sunlight, etc. Gardeners must adapt to ever-changing and often surprising circumstances. They can do everything right, and have nothing to show for it.
We’re all a bit guilty of treating investing like carpentry, when I find it to be much closer to gardening.
As investors, we crave the controlled, certain, and precise nature of the carpenter’s work, but reality hands us the messy gardener’s circumstances instead. Successful investors realize this, and learn to not let perfect become the enemy of good enough.
We can run inflation projections until we’re blue in the face or join the never-ending quest for the perfectly optimal portfolio, but after a certain point, we hit the law of diminishing returns. It’s comforting to spend inordinate amounts of time and effort calculating precise measurements of future variables like inflation, taxes, and investment returns, but realistically they’re just educated guesses. We get into trouble when we let this false sense of precision fool us into thinking we have all the answers.
This doesn’t mean we shouldn’t plan or analyze at all. What it means is that the ability to realize what’s out of our control is critically important. That ability will save time, energy, and sanity. You have to know when to draw the line and accept that you have done as much as possible to ensure success.
Understand that no amount of number crunching will give you the perfect investment portfolio. Instead of beating your brains in searching for the Holy Grail, figure out a reasonable allocation that you will be able to stick with.
Understand that asset classes perform at different points during the investment cycle. Instead of wasting your time trying to figure out when that will be, figure out a mix that will minimize regrets.
Understand that the market doesn’t care what kind of returns you need from it. Instead of losing your sanity watching every market move, figure out a way to save more and live on less.
Understand that investment strategies will spend time out/under-performing. Instead of expelling your energy looking for the perfect back test, figure out which approaches you truly believe in and stick with them.
As investors, we do not have the carpenter’s power to shape things entirely according to our own will. We’re more similar to the gardener, who only controls so much. The more we try to force investing to be like carpentry, the harder we make things for ourselves. Resign yourself to the gardener’s circumstances, and don’t let perfect become the enemy of good enough.