The Unbearable Burden of Trade Offs

You just can't escape the land of compromises.

Jul 16, 2022

Photo by Javier Allegue Barros on Unsplash

“You just have to know that the more successful you get as an artist, the less of a normal life you have. It's a trade-off.” - Solange Knowles

“Trade-off” is a profoundly contextual word. It comes across as a harmless concept and has been defined on google as ‘exchange something of value, especially as part of a compromise.’ or ‘a balance achieved between two desirable but incompatible features; a compromise.’

Notice the word ‘compromise’ showing up in both definitions. But of course, ‘compromise’ as a word has negative connotations and hence won’t be used widely, even if that is the most appropriate word to be used. Also, it won’t go down well in the world of suits, where we need a word that’s classier and more business-like. That’s where ‘trade-off’ comes in, and it has done a good job of shielding the emotional baggage of compromises. It surely has a long runway ahead in the English language.

But I wanted to highlight the burden of this word, that’s hidden from plain sight. And I will provide a few real-life examples sourced from my own experiences and from materials I have consumed online.

You may recognize this as the tallest building in the world i.e. Burj Khalifa. But I remember the days when it was known by another name i.e. Burj Dubai. Just for a moment, let me take you back in time.

Just imagine yourself in a tower bang opposite Burj Dubai on the opening night. You are on a massive balcony with many more people there, all enjoying their red wines or champagnes. All pretty excited to witness the unveiling of the world’s tallest tower, which on that night was covered by a black cloth.

And this pretty much is the scene on all balconies in the building you are in. You can sense the excitement in the air, people have flooded the streets, there are VIPs at the bottom of the tower, fireworks in the air and then, the black cloth drops to unveil the tower and its name. And at that very moment, you realize, it's no more ‘Burj Dubai’. It had been changed to ‘Burj Khalifa’.

You might have been dumbstruck by this change. I surely was. I was in this exact spot that I made you imagine and it hit me hard that Dubai had to let go of its landmark jewel in order to survive the Great Financial Crisis in 2008. At that moment, I didn’t realize the exact reason for this name change except for some hazy understanding of the Abu Dhabi government bailing out Dubai during these stressful times.

But today, it becomes clear that it was a trade-off, i.e. a compromise of sorts. Dubai gets to survive the GFC with ample liquidity made available to them, but in return, they let go of Burj Dubai and allow it to be called Burj Khalifa. The opportunity cost for Dubai was too huge for not participating in this trade-off and hence they had to bite the bullet.

‘Every tower has its own tower of stories buried underneath.’ - I just made it up ;)

In the annual meeting of Berkshire Hathaway in May 2022, Warren Buffet made a very light-hearted comment on being a better person in the second half of your life. You may have taken it as a learning and may even apply the same in your life by getting better in many domains. But if you have read his autobiography, you would realize that there is a lot he actually said without saying much.

Warren Buffet excelled at building one of the world’s biggest conglomerates that is currently valued at USD 600 billion +. But in the process of building this empire and reputation worldwide, he had to trade off quality time with his first wife i.e. Susan Buffet, and his children. He has cryptically admitted that he regrets it and would have done it better if he ever could repeat his early years.

This exact same conversation came up yesterday with a friend of mine, wherein he shared that his cousin has excelled in his career, at playing a musical instrument, has been focused on fitness, and learned different languages, but he hasn’t been able to give a lot of time to his family. This story had ‘trade-offs’ written all over it.

Nothing good or bad here, nothing to be judged. But every story has a compromise that was made. And every story to unfold will have compromises to be made. One just needs to be aware of it and act accordingly, instead of thinking that life is all roses and fresh air and you could walk away without having difficult conversations or undertaking difficult endeavors.

I recently was listening to Gucci vs LVMH on Business Wars Podcast (highly recommended). And in case you liked this series, then the movie ‘House of Gucci’ is even better and I would rank it as one of the best movies I saw this year.

Maurizio Gucci was the last remaining heir of the Gucci family. He wasn’t a skillful business operator and was recommended by his friends and even his lawyer to hand over the company to a professional team for its day-to-day running, while he could still control the company via his ownership stakes. But he didn’t want to let go of the legacy and wanted his ideas and creations to shape the future of Gucci. This almost got Gucci ruined until Tom Ford was brought in post-Maurizio’s death and he turned it around to the label it is today.

This movie also got me thinking about the trade-offs one undertakes by being stubborn about one’s own righteousness and by ignoring the right thing because it seems like the wrong thing to one’s societal standing. Some trade-offs are unbearable in their execution and I can (just slightly) imagine what Maurizio would be dealing with while making the choices he had to.

These trade-offs along with their burdens follow us in our Investing journey too. They leave us richer sometimes, and wiser at most times. But rarely do they leave us richer and wiser, at the same time ;)

Going for the Stars #

Chasing high returns requires a trade-off with index-like returns. Generating more than the market is all about chasing alpha and very few have been successful at it. Whereas chasing index-like returns entails a boring strategy of investing in passive funds. But the trade-off with that is that you may appear ‘less’ smart than alpha bros.

I recently met someone who has taken a personal loan from Bank A and invested in Bank B in leveraged funds. He was touting his abilities as a financial whizkid but he doesn’t realize that he is sitting on a potential time bomb that could wipe him out clean. He was too full of himself and I didn’t want to burst his bubble. So I heard him out and left, wishing him great luck of course.

I couldn’t change his grandiose perceptions and hence was ok with him sharing his experiments with fire. 5 mins of small talk was a trade-off against 30 mins or more of an unsuccessful attempt at changing his mind.

Hero Worship #

When you trust someone blindly, you are compromising on due diligence that is needed to park your hard-earned money. Hero worship or blind faith makes for good movies and good storylines, only in successful scenarios. Most outcomes ain’t good and you won’t be spending even USD 1 in any theater for that story. But that’s the reality for most decisions based on blind faith.

It’s not a surprise that so many crypto investors are coming out on social media about their massive losses in various crypto assets that they hold.

I earlier mentioned Maurizio Gucci, but I didn’t share how he died. He was killed by someone hired by his own ex-wife, who had blind faith in her psychic’s recommendations. And the outcome was that Patrizia Reggiani (his ex-wife) spent 18 years in jail serving the sentence for Maurizio’s murder.

Some outcomes are catastrophic !!!

Overpromising #

Even overpromising to others has a trade-off. You want to look good and hence you take on more than you can chew. You compromise your health, your leisure time, family time, and gym time only because you want to look good in front of someone and win their heart or their mind share. Once is ok, but it’s toxic when it becomes a habit. One needs to learn to say NO. And if you said YES to something, then be mindful of setting up a reasonable timeline. But the trade-off is that you may not look like an alpha male. Who Cares !!!

So think twice before you commit. It’s worth the time that goes into evaluating the trade-offs that come along with every decision of yours. Some decisions are not consequential, so don’t sweat over them. But some are, and those need you to think them through.

And if you are impulsive in your demeanor, then take on the habit of journaling or bouncing off ideas with someone you respect.

Go slow to go further !!! What’s the hurry…

Drops of Wisdom

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