Jim Williams: Water Cooler Talk
I just had hip replacement surgery a couple of months ago. This was a consequence of several years of intermittent hip distress that has impaired my ability not only to participate in various activities, but also to exercise as I would like.
Prior to the surgery, and while talking to some folks who had (or knew someone who had) hip replacements some time ago, I heard stories of almost miraculous recoveries from the surgery. No pain. Active in a few days. Hiking in a couple of weeks. On the roof carrying shingles or whatnot within a few days. On the golf course after a couple of weeks. Even while hearing these stories, my rational self knew that these stories, if true (which, by the way I do not doubt) were representative of the "long tail" of the distribution of outcomes. That is, these miracle recoveries are not representative of most surgery patients. But my emotional self did not do the hard work of filtering these stories and placing them in context. They were still in my head and thinking that I ought to get the best of all outcomes, were forming my expectations.
The day of surgery all went as expected. I knew that I would be expected to be up and walking while in the recovery room at the hospital. That did, in fact, take place and it seemed pretty routine. I made a full circuit of the hospital ward, including some stairs. Not much pain, and I was able to put full weight on the surgical leg. That gave me a bit of a boost. This looked to be really easy, just like the miracle recoveries I had heard about.
If I was told explicitly, I missed the information about how much pain control I had received. Prior to the surgery, I received a spinal block which is intended to minimize the amount of anesthesia administered during the surgery. The spinal block then lasts a good bit beyond the time the anesthesia wears off. Further, I had received initial doses of powerful pain medications that were expected to be part of the recovery. Missing this crucial information, I thought that the pain just happened to everyone else, not to me. I was very pleased to be doing so well. That first day was a bonanza and my expectations soared.
Well, things didn't stay that way. As the pain medications and the effects of the spinal wore off, I was confronted with the fact that this would not be a painless experience. It took some time for me to get clear on the fact that I needed to get on top of the pain with the pain medications. Thankfully the pain medications were quite effective once I got on the program. But the pain wasn't the biggest affront to my expectations. While I had steady and daily progress after the surgery, I was plagued by the vision of quick and easy recovery and by my shortfall from that vision. Then, I got to the point when the pain was largely gone and I was more willing to walk without walker or cane, but my gait was still rough; wobbly and unstable. Disappointment started to take over. How can this be happening to me? I'm doing everything I'm supposed to be doing. Yet my results are falling short. Woe is me.
After wallowing in discontent for a bit, I took stock of my situation rationally rather than emotionally. I'm almost 75 years of age. I am not and have not been in good physical shape for a few years, partly due to hip issues. My walking before the hip surgery was rough, wobbly and unstable. Now I frequently have to remind myself that while I've gotten back to about where I was before surgery, gains from here will be slower and more difficult. And, the prospect of making gains from here are the primary reason I had the surgery. Even since this realization, I've had good days and bad days, as is the way of life.
What does this have to do with a financial planning / investments newsletter? Well, I think there are some parallels. Firstly, the stories I heard about miracle recoveries are pretty good analogies for the "water cooler talk” about investment performance where folks brag about their investment acumen. Hearing this stuff, it is really easy to let expectations get out of whack. But the fact that someone made X% on a few dollars in XYZ stock is not relevant to you. You can only get your results, not someone else's.
I think it is human nature to form expectations from stories we hear. Unfortunately, the stories we hear are likely to be miracle outcomes, not the average ones. Who brags about an average result? Same for investments. Nobody brags about the money they lost in Silicon Valley Bank, or Enron. It is the home runs that we hear about. When we build our expectations based on those stories, we're bound to be disappointed. I recall very early on after starting this firm, I had a prospective client who said that he knew that achieving a 20% per year return would be easy, (based on what he had heard from friends), and that I would need to beat that in order to get his business. Thank goodness I was by then wise enough to decline the opportunity to come up short on his expectations.
The remedy to these problems is context and perspective. Context in hip surgery is age and physical fitness. Context in investments is risk tolerance and plans for the use of (time horizon for) the funds. Perspective in both cases is to look beyond today and consider the longer-term outcome desired and expected. That will moderate and dampen the effects of day-to-day wonderfulness and awfulness.
By the time you read this, I will have had replacement surgery on my other hip. The experience in the first surgery will (I hope) help inform me about the need to get on top of pain mitigation immediately, the need to absorb good days / bad days with equanimity and focus on long term goals and expectations.
Just like we do with investments.
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The table below shows the returns through March 31, 2023, for selected investment asset classes. In most cases, the results below are appropriate benchmarks for the related mutual funds in your investment portfolio.
