Conviction, Commitment, & Courage

"The index mindset is comfortable –?avoiding decisions requires the least amount of effort. But if you index across every domain, you lose your differentiating features, becoming an average of everyone else."

A few weeks ago, I came across a fantastic article written by John Luttig called "The Index Mindset" (linked at the bottom).

This article discusses how indexing (spreading out your risk across a wide variety of options and opportunities) can generate reliability and safety. Not a bad thing, right?

Sometimes.

In the article, John opines about how this idea has become pervasive across multiple asset classes and even American culture.

When you have a lot to lose, you tend to play more conservatively.

Why bet on a few companies/people/experiences/jobs when you can remain non-committal with one foot out the door, ready for the next best thing?

Approaching public investing with the approach can certainly work - look at buying the basket of tech companies from 2010-2020 for example. Or the classic approach of buying the entire stock market and simply letting time generate your growth?

As more and more people adopt the index mindset, their collective approach distorts reality.

If everyone is buying index funds for retirement that's 30 years away, then the sheer amount of inflows elevate prices, causing an ouroboros effect, inflating prices simply due to "phantom demand" as opposed to improvements in the underlying companies.

Instead of taking a stance in support or opposition based on convictions, knowledge, and deep thought, simply buy a little bit of everything.

Why take the risk of something not working out, when you can safely return a little here and a little there, letting the tailwinds do the work?

Instead of charting your own course, you let the wind determine how and when you arrive at your destination.

This approach has its place in the investing world, and rightfully so. Most average investors can benefit from this as a "base layer" as they grow in wealth and complexity.

However, there are times and topics in life where it pays to go all in.

Warren Buffet, despite being an advocate of index funds for the average investor, has 75% of his portfolio in 5 companies.

Outside of investing, we see the index mindset everywhere -

In school, we were taught to become very well-rounded across many different domains, instead of becoming dominant in a single category.

Today the prevailing wisdom is to become an expert in a specific niche as opposed to a generalist.

Instead of working to build a company for many years, we are told to keep a resume fresh and gain short stints of experience at many companies.

Instead of committing and following through with a few selective events, we are told to keep our calendars open "just in case" and to "take every meeting because you never know!"

Instead of committing to and working on relationships with partners and friends, we stay flaky and opportunistic.

If your focus is entirely on preservation, then the index mindset makes sense. However if you want true expansion of your life, with radical growth and concentration, then you will have to reject these ideals.

There isn't a single answer for where to adopt and where to reject the index mindset, however when you have conviction and apply consistent gentle pressure over time, you are sure to come out stronger for it.

So I ask you, what is a part of your life that needs a little more conviction and accountability? Where is somewhere that you can index so that you can focus on the opportunities?

"The most contrarian thing of all is not to oppose the crowd but to think for yourself."?— Peter Thiel

https://luttig.substack.com/p/indexmindset