How to Cultivate Willful Ignorance

By Jarrod Musick, Client Wealth Strategist, CFP®

The problems of success today are almost exclusively problems of abundance. Too many things to try, too many things to pay attention to, too many opportunities, too many epic experiences to have and too many good investment opportunities. We have too much good food, too much entertainment content and too many ways to make life easier and more convenient. These problems of abundance create their own shortages of time, attention and rest. The way to say no to these great things that pull on our attention is to develop a willful ignorance of things we should ignore.

This means that we keep our focus and intentionally ignore most investment opportunities. The very best returning investment in the world may be a terrible fit for you. Sounds silly, right? Who would not have wanted to get in on Amazon at its stock split-adjusted IPO price of $1.50 per share? If you invested $100,000 at IPO and held until late 2020, you would have just under $130M (a massive 35% annual compounded return).

The Teligent Wireless Example

Amazon was only one of 805 companies that went public in 1997 in the United States. Unless you were one of a few people who knew and believed in Jeff Bezos and his e-commerce bookseller, you likely would have passed. Maybe you would have put your bet on Teligent Wireless which also did its IPO in 1997.

"Former AT&T President Alex Mandl is set to take his wireless start-up Teligent public this week with a $112 million IPO priced at $22 a share. Teligent also has the backing of Nippon Telegraph and Telephone (NTT), which is making a $100 million investment in the company. Some analysts believe Teligent, along with other wireless service providers such as Winstar, will significantly threaten the incumbent local phone providers and GTE." - CNN Money, November 17, 1997

Teligent was liquidated in bankruptcy court less than four years later. I am willing to bet that most of us would have backed a new telecommunications company backed by $100M of Japanese investment money and headed by the former President of AT&T.

The bar for us to have made the one right decision that would have drastically outperformed is incredibly high and the probability is incredibly low, which makes the amount of attention required even more significant. What if we had bought an index fund in 1997 and left it alone? Or, what if we had purchased a single commercial property? The S&P 500 is up about five times since then. Maybe our commercial property would now be up three to four times?

Sticking to What You Know

I am not against swinging for the fences and hunting the next massive investment win. What I am saying is that if you expand your sphere of attention to areas where you have no special information or access, your likelihood of finding one of those huge winners is minimal.

You are better off sticking to what you know - even while knowing that your neighbor, cousin or the next Ted Talk speaker is going to brag that they bought Amazon in 1997 or have 1,000 BTC that they made with their mining operation in 2012. You will never beat everyone. You will always have to suffer the pain of missing out. What you do not have to do is actually care about it. Your job as an investor is to stay focused on your unique experience and knowledge and not try to outperform others in spaces where you have nothing unique to contribute.

Be clear about where you actually have a unique advantage. It is typically either based on your professional experience or based on a relationship you have with someone who has professional experience or in-depth knowledge that they can share with you. Other than these areas, cultivate willful ignorance. Be prepared to tell others that you have no knowledge, no opinion and no interest in that big investment that comes for discussion at dinner. Wear it like a badge of honor and feel free to explain where your expertise actually lies and what investments you are excited about or hoping to find.

The only way we can stay away from wasting our attention and likely our investment capital is to stick to our lane with great intention.

Important note and disclosure: This article is intended to be informational in nature; it should not be used as the basis for investment decisions. You should seek the advice of an investment professional who understands your particular situation before making any decisions. Investments are subject to risks, including loss of principal. Past returns are not indicative of future results.