Confidence Game

Jonathan Clements

WE LEARN EARLY ON whether we’re stronger, faster or have better hand-eye coordination than other kids. We might initially harbor dreams that we’ll get better. But after a while, it’s hard to ignore the mounting evidence of our athletic mediocrity.

If only life were always so simple.

I’ve heard parents say, “You don’t have to tell your kids that they aren’t good at something, because the world will do it for you.” That’s true—except there’s an additional step involved: Your kids have to listen. And they have to keep listening throughout their life.

I’m not quite sure when I fell in love with the idea of running marathons, but fall in love I did. For many years, running 26.2 miles was just something I daydreamed about. But then, in spring 1995, I was in Pittsburgh visiting my then-wife’s family and I went on a 10-mile run with my brother-in-law, who was training for the Pittsburgh Marathon.

That inspired me to start training for the following year’s Pittsburgh Marathon. As I recounted in a 1996 Wall Street Journal article (subscription required), I achieved my goal of finishing in under three hours—2:59:36, to be precise—and so emptied myself that I ended up in the medical tent.

I trained for another five marathons. Two got derailed by injuries, but I ran the other three and my times were respectable. But on each occasion, it was the same excruciating experience. I’d hit the wall around mile 20 and spend the final six miles staggering through hell.

Failing to hear. My body was telling me that the full marathon wasn’t my distance. In fact, it was screaming that truth at the top of its voice. I just wasn’t listening. It took me half-a-dozen years to realize that, while I might be a half-decent runner, the marathon simply wasn’t my distance. Indeed, I had a lot more success—and a lot more fun—running races that were half-marathons and shorter.

In an article in September, I mentioned that it can be fun occasionally to do things that we aren’t particularly good at. Still, that’s not how we should spend the bulk of our time. Instead, if we’re to have a happy life, we should devote most of our days to activities that we think are important, we find challenging, we’re passionate about—and which we think we’re good at.

But there’s that gnarly little word: think. What if we think we’re good at something—and we’re wrong?

Measurement could potentially save us from our overconfidence and allow us to get a better handle on how we stack up. In athletic endeavors, we quickly realize who’s faster, stronger and more skillful. But much of the time, it’s tricky or impossible to assess how we’re doing, and others won’t necessarily put us straight.

Two decades ago, I was approached at a party by a man who knew I was The Wall Street Journal’s personal finance columnist. He proceeded to tell me about a host of investments he owned and his various half-baked reasons for owning them. It was clear he was looking for validation rather than a critical assessment, so I just smiled, nodded my head and escaped the conversation as soon as I could. I later heard that he’d taken my silence as a full-throated endorsement of his investment genius.

Similarly, when I worked at Citigroup, a colleague came to the office one day dressed in an outfit that bore some resemblance to a sailor’s uniform. The outfit might have looked okay on a child, but it seemed absurd for a grown woman. The entire office was talking about it—and, yes, I realize that men typically aren’t subject to the same sartorial commentary. Still, the outfit was truly awful. Did anybody tell the poor woman? Of course not. Instead, when folks ran into her, they couldn’t help but stare, and then—to cover up their staring—would blurt out, “I love your outfit.”

Struggling to measure. Do you have terrible dress sense? It’s hard to know for sure, though I’ve noticed the standard HumbleDollar office attire of shorts, ratty T-shirt and old sneakers tends to elicit pained looks from across the breakfast table. In fact, there are numerous areas of our life where we may never know how good or bad we really are.

For instance, at the office, we might rub folks the wrong way, and yet not realize it. We might have a reputation for failing to pull our weight or for making mistakes, and yet have no clue. Instead, we might spend our careers befuddled by the promotions we never got and the pay raises that didn’t happen, never grasping why—unless we ask colleagues or supervisors for their brutally honest assessment. And, let’s face it, while we might say we want honest feedback, most of us really don’t—and those we know, whether out of kindness or lack of courage, probably won’t give it to us.

Meanwhile, even if we’d like to know the truth about our real-estate dealings and our investments, it’s hard to gauge how we’re really doing. Yes, we might have sold our home for more than we paid. But what about the costs to buy and sell, as well as all the expenses incurred along the way, including maintenance, repairs, remodeling, mortgage interest, homeowner’s insurance and property taxes?

If folks have attempted to account for all of this in an elaborate spreadsheet, I might—with an emphasis on “might”—believe they have a decent handle on how they’ve fared with homeownership. But failing that, my response to their boasts will be to smile noncommittally and assume they’ve cooked up some story to bolster their fragile ego.

Ditto for investing. It’s extraordinarily hard to accurately assess how we’ve done with our investments, especially once we account for buys and sells, savings added to the portfolio and money withdrawn, and the risk taken.

Still, I think it’s worth trying. You might keep an eye on one of Vanguard Group’s target-date or LifeStrategy funds and use its performance as a benchmark against which to measure your portfolio’s performance. And if your favored financial company calculates your portfolio’s dollar-weighted return, perhaps labeling it your “personal rate of return,” and you can compare that to a similarly allocated target-date or LifeStrategy fund, that’s even better.

What if the comparison proves unflattering? The temptation is to explain it away, rather than changing behavior. But think back to elementary school, when you were left far behind by the other kids when sprinting across the gymnasium floor, and it dawned on you that you were no latter-day Jesse Owens. When it comes to your portfolio, your career and other aspects of your life, you want to be that kid you once were—and listen to the message the world is sending.

Jonathan Clements is the founder and editor of HumbleDollar. Follow him on Twitter @ClementsMoney and on Facebook, and check out his earlier articles.

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