Relax, Reflect, and Roll On

Published by: Rob Furlong

I recently celebrated a milestone birthday doing one of my favorite things in one of my favorite places: riding my bike in the San Juan Mountains of southern Colorado. Over a seven-day stretch, me and two of my closest friends climbed 20,000 feet over a 210 mile network of remote gravel roads and single-track trails between Telluride and Moab. We were completely off the grid.

I didn’t know it at the time, but as we pedaled through Aspen groves and red rock canyons, the equity markets were coming unglued – the S&P 500 dropped nearly 6% that week. It collapsed another 5% on my first two days back in the office. Returning to work in the middle of this turmoil tested my emotional fortitude. Investing is hard; especially so during times of extreme volatility, when emotion hijacks our decision-making and the temptation to sell is high. Fortunately, I was able to draw on an important investing lesson that was reinforced on my backcountry mountain bike trip.

Our adventure was mostly unsupported. We had only what we were carrying, except for food (and a beer or two) that was cached in a network of huts along the way. The region where we rode was remote; we saw more coyotes than people. Everything was going according to plan until the end of day four, when we rolled into camp and discovered one of our bikes had two broken spokes. We brought an array of tools and spare parts for any likely emergency, but we didn’t have spokes. It doesn’t take an experienced rider to know that wheels with broken spokes don’t roll, they wobble. And the more you ride them, the worse they get. In our eyes this was a disaster. There was no way we could ride another 75 miles with a compromised wheel. Our adventure was over. As we unpacked our satellite phone to call for help, we were feeling dejected that this trip we began planning a year ago would be cut short.

However, because we were tired and hungry we decided to make dinner before dialing. As our emotions calmed we reflected on the problem. Was it really as bad as we initially thought? Could we true up the wheel by spreading out the remaining working spokes? What if we rode slower and then walked rough sections? Critically thinking through the problem resulted in the solution of rigging a fake spoke with some Kevlar chord by threading it through the hub and rim. Our fix wasn’t perfect, but it would do. We also thought through contingency plans in case things got worse. In short, we relaxed and reflected on the situation instead of panicking and letting emotion rule our decision-making. We rolled out the next morning not knowing what the next few days would bring, but very comfortable with the situation given our thoughtful critique and a dedication to monitoring the integrity of the wheel along the way. In the end, our rig held up. Over the last few days of riding through our crisis we experienced some of the best moments of our trip, including passing remote fossilized dinosaur tracks and riding into Moab on the famed “Whole Enchilada” trail. Our journey would not have been the same had we missed these highlights as a result of caving to our emotional knee-jerk reaction and bailing a few days earlier.

Unfortunately, this is what many investors are doing now. Equity market volatility has spiked to levels not seen since the financial crisis, and concerns about deteriorating global growth are emerging everywhere from macro indicators in China to forecasts by multinational companies. It is prudent to now exercise more caution than usual. However, this doesn’t mean automatically selling everything. Stepping back and thoughtfully reviewing the situation almost always leads to better conclusions and solutions than initial do emotional reactions. Investing is brutally hard. The best advice is to selectively buy great companies at attractive prices and let them compound returns over time. This is easier said than done, especially during times of rising volatility when emotions hijack our decision making. However, it is during these times that it is especially important to remember the lessons recently reinforced to me on my bike: relax, reflect, and roll on.

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