Are Your Expectations Too High?
Issue #2648
- WEALTHY: The problem with great expectations (Michael Masterson)
- HEALTHY: The unexpected health benefits of bacteria (James B. LaValle)
- WISE: Leonard Roy Frank on the definition of success and failure
ALSO IN THIS ISSUE:
- How to go on a real vacation (Yanik Silver)
- Starting a business with 10 customers (Seth Godin)
- It’s Fun to Know… why clothes shrink
- Add “mendacious” to your vocabulary
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“Success, n. More achievement than expectation / Failure, n. More expectation than achievement.”
Leonard Roy Frank
Are Your Expectations Too High?
I once pitched a real estate deal to a small group of affluent investors. I was (very loosely) projecting upside annual profits in the 25 percent range. That’s a very healthy optimum return, but was not uncommon for real estate development deals at the time.
I thought everyone would be pleased with the projections. But when I finished, a man in the back of the room raised his hand and challenged me.
“I wouldn’t even think of investing in a deal like that,” he told me.
“Okay,” I said, and looked around the room for other questions.
“Don’t you want to know why?” he asked me, visibly upset by my nonchalance.
“Not really,” I said. “I’m sure you have good reasons.”
“But I want to tell you,” he said.
“Okay,” I said. “Tell us.”
“I have high standards,” he said smugly. “I never invest in anything that won’t give me a 10-to-1 return on my money.”
“Aha,” I said.
And then I took some other questions.
Whether we do it consciously or not, we all set expectations for every event we take part in, every task we undertake, and every challenge we accept. Some success experts tell us that it is better to set our expectations high, because we can achieve more that way. “Shoot for the stars,” they say.
The idea that you’ll get more if you have higher expectations has a certain logic to it. We’ve all had the experience of succeeding at something we thought we would fail at. “Holy cow! I parred that hole. I’m not a duffer. I’m the next Tiger Woods. From now on, my goal will be shooting scratch golf!”
These happy but rare moments teach us something important – that it is possible to underestimate what you can do, and that you never know how well you will perform until you try.
We don’t want to lose for lack of trying, so the intelligent athlete will do everything he can to put the expectation of success in his mind. Visualization – the technique by which a competitor imagines vivid details of the competition and sees himself emerge victorious – is an important and useful method for overcoming doubt and building confidence.
But visualizing success and setting goals are two different things. You should always visualize your success. But it is a mistake to set unrealistically high goals.
Let me explain.
Marcus, one of my Jiu Jitsu instructors, is a professional fighter. Before each contest, he imagines himself winning the fight. He pictures himself standing after the fight, his hands raised in victory. When he talks about the match beforehand, he speaks as if his victory were a foregone conclusion.
This positive mental attitude has been a factor, no doubt, in many of his career victories. I know it was a factor in his beating the world champion in his weight division two years ago. But it didn’t help the following year when he fought the same guy again and lost.
When I get involved in a new business, I am hopeful that it will succeed. And I occasionally visualize that success by actually imagining a P&L statement with a seven- or eight-digit figure at the bottom.
But when it comes time to set goals for the business, I don’t use that visualized number. Instead, I make three projections over a one- to five-year span. One of the projections is based on what the profit would look like if everything went as well as it could go. Another one is based on what the loss would look like if the business failed completely. And a third is somewhere in between.
By working out three projections instead of one, I am able to think about how I can handle certain contingencies if they occur. This three-tiered approach also helps me separate my business intentions from my emotional expectations. (Reread my article “Emotional Detachment and the Zen of Golf to understand why that is important.)
This process, as you can see, does not prevent you from imagining success. What it does – and this is critically important – is help you make plans that are based on a range of realistic projections.
Having unrealistic expectations for passive investments is perhaps the worst mistake of all. (Keep in mind what I’ve always said about passive investments: They are risky because you can’t possibly know enough about them, and you can’t control them even if you know that something is going wrong.)
Remember the man in the back of the room who chastised me for projecting an upside return of “only” 25 percent a year on that real estate deal? Well, he invested in another development that offered the 10-to-1 return he insisted upon. Less than 12 months later, that development went broke… and he did too.
The investment I pitched, as it turned out, gave its investors a 1,000 percent return over three or four years. It was almost certainly the best real estate deal I ever participated in. I never would have projected a 1,000 percent return. It would have been insane. But it turned out better than my best expectations.
And once – just once – I shot an eagle. But I still don’t expect to break 100.
I wonder how all the people who invested with Bernie Madoff feel about the projections he was making.
Setting unrealistically high ROI goals is bad for two reasons:
• You are much more likely to be disappointed, and
• You are much more likely to make bad decisions.
Assuming you are mentally tough enough to deal with disappointment, you still shouldn’t set your investment goals too high. If you do, you will pass up good investments because the yield they promise will be below your threshold. So what should you do?
I would recommend you do what I do when I set business goals. Make three projections. Make the first one, the most optimistic one, about half of what the broker tells you to expect from the investment. Make the second one as pessimistic as possible. And make a third one in between.
My experience, in both business and investing, is that the middle projection will usually be the closest to what comes to pass.
Bill Bonner, writing in the Daily Reckoning, explained why his expectations for his investments are even lower than mine:
“While we are on the subject of our own investing, we would like to confess that we do not even try to make a profit from our investing. We only try to preserve our capital. Why? Because we have been very lucky in business… lucky in love… lucky in family… lucky in so many ways. Expecting to be lucky in our investments would seem like ingratitude on our part.”
So don’t be greedy. Make three projections. Don’t invest if you can’t be happy with the middle one and okay with the worst one. Do that and you will have a good, long life of wealth building. And every once in a great while, you may get a shockingly good result.
[Ed. Note: One of the best ways to feel better about yourself, to feel as though you have a purpose in life, is to pursue something you're passionate about. And there's no better way to pursue your passion than by starting a business related to it. Get a step-by-step guide to starting and growing an Internet business right here
Get more of Michael's surefire strategies for getting ahead in business and in life in True Path to Profits: A Master Entrepreneur's Guide to Business Success. Find out more - including how you can get a bonus subscription to Michael's VIP newsletter, Ready Fire Aim - right here ]
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Sending Your E-Mail to a Black Hole
By Yanik Silver
I want to point out something I did during a recent off-road Baja dune-buggy racing experience with my Maverick Business Adventures group that might seem a bit over-the-top.
I completely “black-holed” all my work-related communications for the week. For one thing, I had all my e-mails deleted, with a note telling people who to contact while I was gone and asking them to e-mail me again after my return if they still needed my help.
How many times have you come back from a vacation, only to be a little more stressed out than you were when you left because you’ve got 2,313 e-mails sitting in your inbox? Or, worse, because you tried to knock them out while you were away?
I believe in truly disconnecting and recharging your batteries. And I came back from my trip feeling relaxed and invigorated.
While others were using their iPhones to connect online and keep checking stuff, my little low-tech Razr phone didn’t have a connection – and I couldn’t have been happier. I had a satellite phone to call and check in on my wife and the kids – but I loved being without e-mail, my laptop, and cellphone. I fully recommend it.
[Ed. Note: Serial entrepreneur Yanik Silver believes you can make more, have more fun, and give more back! But he isn't always out racing dune buggies. He's breaking new ground in online marketing every day. Discover his proven marketing advice by clicking here
You too can enjoy the lifestyle of the Internet entrepreneur with ETR's step-by-step in-home guide to starting an online business from scratch. You'll get instructions for how to quickly build it into a moneymaking powerhouse from the comfort of your own home - a business that could allow you to quit your day job. Learn how to make more money for just a couple of hours of work a day right here ]
Worth Quoting: Seth Godin on the Secret to Building a Business
“Find ten people. Ten people who trust you/respect you/need you/listen to you…
“Those ten people need what you have to sell, or want it. And if they love it, you win. If they love it, they’ll each find you ten more people (or a hundred or a thousand or, perhaps, just three). Repeat.
“If they don’t love it, you need a new product. Start over.
“Your idea spreads. Your business grows. Not as fast as you want, but faster than you could ever imagine.”
(Source: Seth Godin’s blog)
Why Probiotics Are Good for Your Gut
Naturopathic doctors and other complementary and alternative practitioners have long known about the numerous health benefits of probiotics
Literally meaning “for life,” probiotics are living cultures of microbes that reside naturally in the intestines. They finish the digestion of food, which can help prevent food allergies. In the process, they make some B vitamins and vitamin K, so they support good nutritional status. They also make substances that keep intestinal tissue and mucosal linings built up and strong, and support a healthy balance in the immune system.
While supplementing with probiotics is just now being more fully recognized by Western medicine, it has been valued for thousands of years in other cultures. The Romans and medieval Europeans got probiotics in foods like yogurt and sauerkraut. People in Asian countries got them in fermented fruits and fish. In Japan, miso (a combination of fermented soy and rice or barley) is still a staple, and many Japanese foods are fortified with probiotics.
I’ve been recommending probiotics for quite some time, especially for anyone with a digestive disturbance, such as irritable bowel syndrome. I wrote extensively about this in my book, Cracking the Metabolic Code – and it has been gratifying to see the explosion of research confirming the many health-related benefits of probiotics. For instance, a recent article in the journal Nature Clinical Practice Gastroenterology & Hepatology stated that probiotics do indeed show promise for the treatment of inflammatory bowel diseases (IBD) such as Crohn’s and ulcerative colitis.
Many modern medical practices – e.g., the use of antibiotics and non-steroidal anti-inflammatory drugs like ibuprofen – and just plain old stress and disrupt the balance of flora in the intestines and even cause the intestinal innings to break down. I recommend using a human-strain probiotic supplement at least a couple of times a week for maintenance. Look for supplements that have a bacteria count of at least 3 billion or more per capsule.
[Ed. Note: It truly is possible to improve your health just by making a few simple changes to your diet and lifestyle. James B. LaValle, RPh, ND, CCN - founder of the LaValle Metabolic Institute and a nationally recognized expert on natural therapies - can give you easy-to-understand directions for living the healthy life you've always wanted. Learn how to feel better and live longer right here. ]
It’s Fun to Know: Why Clothes Shrink
From the Department of Complicated Scientific Answers for Simple Questions:
So why do clothes shrink in the wash machine and/or dryer? Well, on a molecular level, the fibers of natural fabrics (like cotton) are made up of long chains of molecules connected by hydrogen bonds. When a shirt or pair of pants is made, those chains and bonds are stretched and pulled. Washing and drying break some of the bonds, causing the fibers to return to “normal” size.
(Source: Mental Floss)
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Word to the Wise: Mendacious
“Mendacious” (men-DAY-shus) – from the Latin for “lying” – means false or untrue.
Example (as used by Robert Shogan in The Double-Edged Sword ): “Lyndon Johnson and Richard Nixon, two very different men, each from a different party, were seen as mendacious and deceitful, driven to self-destructive actions by forces they could not control.”
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Copyright ETR, LLC, 2009
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