I just finished reading the book Good to Great. The book describes some traits that separate “good” companies from “great” companies. If you enjoy learning about the business world, corporate life, etc, then I recommend the book. One particular trait that many of the “great” companies possess was described by author Jim Collins as “the Stockdale paradox.”
Who is Stockdale, what’s his paradox? During the Vietnam War, James Stockdale spent seven years as a prisoner of war in the infamous “Hanoi Hilton” prison. I won’t go into nitty gritty details of Stockdale’s imprisonment, but I think you’ll find it quite eye-opening (Wiki). Some of the older readers of the Best Interest might remember Stockdale as a Vice Presidential candidate on Ross Perot’s ticket in 1992. Stockdale was the guy who didn’t have his hearing aid turned on at the debate, and needed to ask to have a question repeated. You know, because the Vietnamese prison guards ruptured his ear drums when he wouldn’t divulge any secrets. Pretty tough guy. Despite repeated torture over those seven years, Stockdale survived as an unbroken man. How did he do it? In Good to Great, Jim Collins writes how Stockdale managed to simultaneously:
- Never lose faith that he would prevail in the end.
- Maintain the discipline to confront the most brutal facts of current reality.
Stockdale felt that if he ever lost the belief that he would eventually be free, then he would lose his purpose and quickly wither. But if he failed to confront the brutal facts of his current reality, then he wouldn’t be able to steel himself against the harsh daily conditions. For 7.5 years, he woke up knowing that he might get tortured before sundown. There’s no sugar-coating that reality. But, in the back of his mind, he maintained faith that— one day—he would be free. It’s “brass tacks” vs. boundless optimism. It’s one-day-at-a-time vs. 20 years from now. It’s a paradox.
For Stockdale, this mental paradox allowed him to survive intact. In the business world, Collins suggests that the companies using the Stockdale paradox can simultaneously fight their most urgent fires (the brutal facts of current reality) while maintaining their true mission (prevailing in the end).
What about for me and you?
First off, I admit that the Stockdale paradox is easy to talk about, but gosh darn hard to implement. It’s easy to say, “I have faith that I will one day be 25 pounds lighter. But today, I gotta do my 1-hour workout.” Sounds great! But that workout will make you uncomfortable. You’re already drained from the work day. You’ll be out of breath. You’ll be sore tomorrow. And then you have to do it again, and again, and again. That’s why Stockdale uses the word discipline; you have to maintain the discipline the confront the most brutal facts of current reality. I certainly struggle with that.
But Stockdale did it, and so can you.
In your personal finances, the Stockdale Paradox can help you achieve your goals. What are some examples?
Never lose faith that you will prevail in the end.
Basically, this means long-term goal-setting and self-determination. When do you want to retire? What do you want out of life? What makes you happy? What actions are required for you to get there, and how long will it take? Things might be hard right now, but you’ve gotten this far. Believe in yourself that you’ll get where you want to go.
Maintain the discipline to confront the most brutal facts of current reality.
But where are you right now? Student loan debt? Living paycheck to paycheck? Just starting a family? These are the types of brutal facts that should be dictating your financial life. You can’t simply neglect your debt. You can’t spend like a fool when you have a mortgage. Dreaming about your future lake house won’t put food on the table. What can you have to do today to chip away at the problems you’re facing?
If you’re looking for other examples, I’d refer you back to my thoughts on debt and on the impulse to buy. If you’re in debt, I think you should confront that gorilla. Face the facts. Take action. Don’t ignore it! If you regret things you’ve spent money on, you’ve got to get to know your “buy that!” impulse. It’s uncomfortable, I know! But it’s good for you, just like that hard workout.
By combining these two beliefs, you provide yourself with a day-to-day gameplan and a long-term roadmap. You’re prepared for the present, planning for the future, and (hopefully) learning from the past as you go along. I sincerely hope you never have to face as brutal of a reality as Jim Stockdale did. But I hope that you find wisdom in his words, and that you prevail in the end.