It’s no secret that football is a dangerous game. Despite firsthand knowledge of this fact, former NFL wide receiver Ed McCaffrey had no qualms about letting his sons play the sport.
In the book Everybody Lies, author Seth Stephens-Davidowitz shares McCaffrey’s reasoning:
“These guys have energy. And, so, if they’re not playing football, they’re skateboarding, they’re climbing trees, they’re playing tag in the backyard, they’re doing paintball. I mean, they’re not going to sit there and do nothing. And, so, the way I look at it is, hey, at least there’s rules within the sport of football…My kids have been to the emergency room for falling off decks, getting in bike crashes, skateboarding, falling out of trees. I mean, you name it…yeah, it’s a violent sport. But, also, my guys just have the personality, where, at least they’re not squirrel-jumping off mountains and doing crazy stuff like that. So, it’s organized aggression, I guess.”
In short, football was an imperfect outlet for the McCaffrey boys’ energy, but it was preferable to the alternatives. Sure, it would have been better if McCaffrey convinced his sons to take up fly-fishing, but the odds of that happening were likely slim to none.
This echoes computer scientist, Richard P. Gabriel’s “Worse is Better” framework which says the technically correct, but overly complex, solution is inferior to the imperfect, but more easily implementable, solution. In the “Worse is Better” framework, practicality is valued above all else. Like Ed McCaffrey’s solution, the result is worse than perfection, but better than the alternative.
Worse than perfect but better than the alternative is a counter-intuitive, yet wise, way to consider investing.
The allure of the perfect portfolio has cost investors more money than any bear market. Higher fees, excessive trading, and unnecessary taxes are hallmark signs of an idealistic investor pursuing perfection.
The joke of it all is that the perfect portfolio does not exist. We only have the ability to know what was a perfect portfolio in the past, not what will be a perfect portfolio in the future. For some reason, we’re really good at conflating these two very different things.
Most of us are better off aiming for something worse than perfect but better than the alternative with our investments. This means a portfolio that is tied to an overall financial plan, which puts things into context. This means a portfolio that is simple enough to be understood, so we have appropriate expectations. And, most importantly, this means a portfolio that we can stick with because otherwise what good is it?