Beware of averages! If you shoot at a duck twice and the first shot lands a foot in front of it and the second one lands a foot behind, on average you killed it, but you won’t be eating duck tonight. People love looking at averages because they want reassurance. What’s the average home price in that area? I bought a house for less than that so I made a good deal. My house is worth more than that so I’m doing great. What’s the average salary for my job title? I’m making more than that, so I’m doing great! I’m making less than that so I’m falling behind!
We don’t live in mythical Lake Wobegon, where everyone is above average. Half the people you know will be below average in whatever you are measuring. That’s not me being cruel, that’s just how averages work. Maybe you are a below average spouse? Maybe you are a below average bowler? Maybe you are an above average golfer? Averages are for comparison, and comparisons lead to envy and cause you misery. Charlie Munger said that envy is the worst deadly sin because with the other deadly sins, like lust and gluttony, at least you can have fun with. But envy eats you up inside and you don’t get any enjoyment out of it, so why do it?
If you want to get into the top half, will that be enough or will you want to get into the top 25%? What about the top 10%? Will you feel like you made it if you got into the top 1% or will you have to be the number one? With something like wealth, you can spend all your life chasing it but still never get to the top. Elon Musk now has a net worth of $200 billion and counting. Does Jeff Bezos lose sleep over that because he’s not catching up?
A hedge fund manager who closed his fund, walking away with $100 million, was asked by a reporter what he planned to do next. The reporter expected him to say that he was going to buy an island and retire, which is what many people like himself fantasize about. The manager said that he was starting another fund. The puzzled reporter said “wow, if I had $100 million, I don’t think I would start another fund” and the manager replied “that’s why you don’t have a $100 million dollars.” That sounds like the type of thinking that got Bill Hwang to a net worth of $20 billion over his lifetime, only to lose it all in two days.