Image of El Capitan

Free climbing and understanding risk

A friend recommended ‘Free Solo’ recently. Its a film about Alex Honnold and his rope-less ascent of Yosemite’s El Capitan ( see image above!). Alex, it would seem has a very high risk appetite but even so, I was fascinated by the thoughtfulness of Alex’s answer to the question as to ‘why he was drawn to the risks of free soloing?’

“I don’t take risks” he said calmly and clarified “if I thought a climb was risky I wouldn’t do it!”

He sees risk as different from consequences. With meticulous physical and mental preparation off the mountain, rehearsing the route in all weathers(with ropes), thinking through alternative scenarios as part of an explicit plan…..then he sees the free solo climb as low risk BUT without doubt, very high consequence. Any meaningful error when free soloing results in death.

Alex loves climbing with a passion but has learned how to deal with risk by knowing himself really well and following his process.

This outlook is completely consistent with investors that succeed over the long term. They can have a high or low risk temperament but understand this default attitude, they have a clear plan and work to understand themselves better and better throughout their career. They are often passionate about their craft but above all process focused.

Most asset managers however confuse risk and consequence. Investing is highly risky if you are dominated by hubris and have a non explicit process. High risk investing can have good shorter term consequences but over time will kill you!

Better then as an investor, to understand yourself, create a disciplined plan and keep updating and practising your process for the career long climb. The landscape maybe be challenging but good process can have rewarding consequences.

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