The Struggle of (De)Motivation and Asynchronous Payoffs

I’ve always been a slacker.  This is something that people are either surprised or annoyed to hear, depending respectively on whether they think I’m someone who I’m not, or whether they think I’m humblebragging or doing the false humility thing or whatever.  (Perhaps guilty as charged – I suppose usually you don’t get an MBA and a couple years of professional work experience before you’re 21 with a sloppy work ethic – and I’m certainly not judging myself relative to “average” but rather relative to where I think I should be, which explains at least part of the delta.)

But as I’ve talked about in various places, the truth is that I never really worked all that hard most days, it didn’t feel like.  There were times when I had a lot to do between coursework and real work and I got it all done, but what I’ve never really been good at is doing work that I don’t actually have to do (in the sense of, not having immediate payoff or consequence if it isn’t done.)  i.e. – even when I was working full-time plus going to school full-time, I would still play video games near-addictively many weeks when I should’ve been studying, instead only cramming for exams at the very last minute.  Every semester in school, I told myself that this would finally be the semester when I actually, like, did the whole student thing properly and took notes and kept up with the reading and… every semester, that did not happen past the third class, nope.  I have the spiral-bound notebooks with two pages of dated notes and another page of undated doodles to prove it.

One of the more jarring transitions from college/analyst life to being a portfolio manager was realizing that I could no longer skate by on doing work in a caffeine-and-sugar-aided-spurt at the last minute before the deadline, because there are no deadlines, and because (at least if you invest the way I do), you need to follow a methodical and consistent research process to generate a large-enough pool of potentially actionable investment candidates down the line.

That is to say: if, for whatever reason, you slack off on research today, the detrimental effects usually show up in future periods, creating a challenge because of the meaningful asynchronicity of payoffs with a lack of clear natural interim steps or milestones.  Jim Roumell, who is unusually transparent and thoughtful (both publicly and privately) about his experiences, cleverly and succinctly summarized this in a recent podcast interview with John Mihaljevic (quoted portion starts around 9:20).  Note:  Jim’s comments have been summarized/paraphrased for clarity.

  • [In 2013], we were spending a lot of time (on non-investing activities)… the first year, things were going fine, but that’s really kind of older stuff maturing.  When we really started getting into 2014, a lot of the seeds that normally would have been planted in 2013 – candidly, they weren’t, because there was so much time spent [on marketing] – it happens, it’s very insidious, it just begins to happen slowly, and in retrospect, [I didn’t notice it] – so ’14 was a wake-up call, and I think by mid-’15… [we] decided we had to get back to our knitting and we had made a mistake… things have gone very well [in the 18 months] since that decision, [although] we’re cognizant that the game’s not over.

This sort of thing takes a lot of courage to admit because it’s just not said in a public domain,  just like it’s not said (in front of HR / your boss) that you probably work 30% of the time and mess around on the internet the rest of the time.

The thing though is that, I think, it’s true for many of us, whether in the field of investing or elsewhere, whether the bogey-man is too much time spent on marketing, or too much time spent on consuming content that has the sheen of work (say, reading the news or watching stock prices) but has no payoff whatsoever, or simple god-I-don’t-want-to-wake-up-and-spend-all-day-working-on-yet-another-company-that’s-30-percent-frickin’-overvalued.

That latter bucket, that’s my on-and-off problem: midway through 2017, even moreso than during a 2016 most value investors found challenging, ideas are hard to come by.  Most things that are metrics-cheap have way too much obvious hair on them (what no I don’t want a 5x levered balance sheet in a cyclical commodity industry with massive customer concentration, thank you very much).  Most things that are interesting qualitatively seem like they’re about three market corrections away from being actionable – and as much fun as it can sometimes be to learn about interesting little niches, a lot of the joy is taken away when the briefest possible look at the financials suggests that there’s fairly low real near-term likelihood of the stock hitting my required discount to “fair value” without some sort of meaningful fundamental degradation.

The reason I really liked Jim’s phrasing is his usage of “insidious” and “slow” because they describe, totally exactly, how I feel.  It’s usually not a bright-line on/off switch from “I am gonna get lots of work done today” to “huh, I wonder if my tomatoes have grown any bigger since I checked on them five minutes ago… or if there’s any new articles about the Cowboys’ voluntary OTAs.”  It’s more a gradual progression from research firing on all cylinders to a project that should take one day dragging out into two or three because… what’s the hurry, it’s not like the stock is going to run away from me if I don’t figure this out by Tuesday.  Why not just put it on the burner until next week?  And do I really need to set up an IR call this month?  I might as well do it in February.  Of 2037.  Because we all know the stock won’t get cheap enough until a few decades after that.

Exaggeration aside, the challenge, of course, is that with the sort of research process that I have, the first dopamine hit (i.e. getting to buy the stock at an attractive valuation) usually occurs so long after the work that led to it, that it’s wholly useless for motivational purposes.  And when things actually hit the fan (ex. Feb 2016 or pre-election 2016) and there are a lot of opportunities, you can’t possibly do enough “cramming” then to make up for time lost.  So, what can I do to make sure I stay on track?

Tangible Action Items (Or, At Least, Things That Have Helped Me)

1. Focus on “lead measures” vs. “lag measures” and gamify them

yes yes, this post is mostly a shameless Franklin Covey (FC) plug (disclosure: long, in case you had forgotten).  No but seriously, part of my attraction to the company is that this stuff works.  To summarize The Four Disciplines of Execution (4DX) in such a traumatically botched way that mgmt will stop taking my calls if they ever notice this blog post, you can think about your business (or your life) in terms of “lead measures” or “lag measures.”  Lag measures have more direct correlation to what you actually want, but are usually too late to modify directly – i.e., revenues or profits could be viewed as a lag measure, and if you want more of them today, you are gonna need a time machine to go back to a few months ago, or maybe even farther.  The “lead measure” might be something like warm leads, or new product development, or whatever, but basically it’s something that will lead directly to your desired lag measure, but is actually modifiable in real time

So for productivity purposes, it’s important to determine quantitative, trackable, measurable “lead measures.”  In my case, I’ve settled on a pretty simple one: “pages of research.”  I target 20 pages per week, which is really just a psychological gambit for a true goal of 25 pages per week, but I tend to do better personally when I feel like I’m on top of things than when I feel like I’m behind (with a lower goal, I get to feel like I’m winning more of the time.)

Research pages are defined as anything ranging from my own written research on new companies, to earnings reviews of portfolio companies or updates on other companies I follow, to notes from IR or management calls that I make.  This would not be a robust goal with a large team because there are plenty of ways to game this – I could do a lot of “research” that’s useless and unproductive, or I could just stuff research reports with lots of block quotes and charts and graphs and such.  However, since it’s just me and I trust my ability to not do stupid stuff like that for the sake of “winning the game,” it works.

What is the correlation?  Well, my investment process is, vaguely, A) research companies, B) follow them over time, C) eventually, statistics dictate that some of them will become cheap enough to buy, and I’ll know a lot about them already, making the go/no-go decision easier/faster and leaving more time for thought and further due diligence.  (I’ve discussed previously why I shy away from the quantitative-heavy, screener/metrics-focused, cheap-now approach that many investors utilize – briefly, behavioral bias.)

Given this process, if I (arbitrarily) assume that half of my work is on new companies and half is on existing companies, and the average report is 10 pages, and that in any given year, 5% of companies on my list will be actionable at my 20% IRR hurdle, then adding 40-50 to my database should result in two or three brand spanking new ideas per year, with the existing database of course hopefully adding more (I don’t need many given concentration – 4-5-6/yr should theoretically be sufficient).  In practice these numbers are probably B.S., but I tried to at least make them reasonably directional B.S. – to the extent that if I hit the guidelines, I should be “planting enough seeds” so to speak.

Are these guidelines perfect?  No, of course not – but they are certainly, directionally speaking, a helluva lot better than what I was doing previously (no specific goal, just doing what I felt like).  My next step is to extend this beyond research to big-picture reading / personal development stuff as well – which even moreso than research is one of those “payoff isn’t always immediate” things that is easy to put on the backburner when you have other stuff going on.

2. Pacing?  Screw pacing.

alright so I’m gonna go ahead and blow up everything I just said – yes, it’s great to have something to keep you on track; it helps me a lot and I swear by it.  but at the same time, I think one of the core advantages to being on your own vs. working for someone else is you don’t have to conform to the stupid social norm of sitting at your desk for a fixed number of hours regardless of the actual amount of work to be done (or whether you are working).

I don’t think my experiences quite rise to the rigorousness of precisely-tracked, sensor-driven A/B testing that some people employ, but in the ~18 months I’ve been solo, I’ve tried a lot of things – sitting desks, standing desks; working 7 days a week, working 4 days a week; going at a blistering pace for as long as I can, trying to measure my pace; etc.

What I’ve found (and this is really just personal, not intended to be used as a mantra) is that my productivity comes in waves – I will have weeks/months where I slice through my targets like they’re a block of Kerrygold butter that’s been sitting on the counter for hours; there are other days where I feel like I’ve struggled for hours to read a single risk factors section.  I’m a big fan of working for myself rather than against myself, mainly because doing the latter tends to lead to a) burnout and b) emotional guilt for being unproductive, which prolongs the unproductive state and so on.

This is, really, how I’ve always been – I’m an (amateur) novelist and some of the “classic” advice given to aspiring writers is “butt in chair” – which means what you think it does; i.e. sit down every day and write no matter how you’re feeling.

Yeah, that’s not me – I will go months, years even, without writing anything of meaningful heft, then will almost pretty much spontaneously write an entire novel in an unimaginably short period of time (my record is four days for a ~58K word novel, but usually we’re talking more like a few weeks or months).  For some people, slow and steady may win the race – but personally, when I hit the gym and am feeling it, I need to take advantage of it and not worry about spending the extra half hour or hour there to do extra sets, because there will be an equal number of days where things just aren’t going my way.

It’s important to note that this isn’t, or shouldn’t be, an excuse to just chicken out when things aren’t going perfectly.  But at the same time, systems should have some embedded level of flexibility to account for the fact that we’re not perfectly consistent machines.  This is part of the reason I chose a weekly goal – while I certainly still have some weeks that are cake and some that are a struggle, I find that having a daily goal is actually much harder because my productivity varies far more on a day-to-day basis than on a week-to-week basis.

3. Please!!!  You’re my ACCOUNTABILI-BUDDY!!!  How will this make me look???

One of the most powerful but underutilized productivity tools is simply the social-proof element of accountability to a standard (Franklin Covey’s 4DX uses this as well).  Malicious and antiquated (I’m sorry, I meant misinformed and… antiquated) HR managers use this as an excuse to deny work-from-home flexibility, and I would buy the logic if modern offices weren’t a terribly inefficient work environment and people were actually productive at work.

Nonetheless, everyone’s heard the story about the eyes (or vaguely eye-shaped objects) above the communal coffee money pool (which really we need a new anecdote – isn’t free coffee a standard perk now? – I digress).  When you’re being watched, you’re more likely to do what you’re supposed to; this is the whole concept behind Weight Watchers (was the phrasing intentional?)

I think this is a valuable tool not just for solo entrepreneurs like myself, but even for people working in large corporate environments where things can get lost in the shuffle and it’s easy enough to just “coast.”  If there’s no natural oversight mechanism, find someone you trust and become accountabili-buddies.  Sharing research with Zeke has actually, unintentionally, had the side effect of incentivizing me to produce more research – because I don’t want to have to answer “uhhh, nothing” when he asks what I’ve been up to this week.

If personal productivity were easy or automatic, it wouldn’t be a multi-billion dollar industry and the seeming holy grail for smart people (alongside happiness / contentment / enlightenment / whatever you want to call it).  So yeah, it’s hard.  But not impossible.  And I’m not yet wholly where I want to be, but I’m farther along than where I was.