It’s amazing how much can be learned from reflecting on seemingly innocuous and unrelated experiences.1 Nostalgia undoubtedly paints the past in rosier hues, but I’m often left smiling at memories’ unintended lessons. Recently, I chanced upon the following sentence in William Bernstein’s The Investor’s Manifesto:
I emphasize three main principles: first, to not be too greedy; second, to diversify as widely as possible; and third, to always be wary of the investment industry.
As my eyes scanned the passage, the words to not be too greedy brought with them a flash of memory—hours upon hours during childhood spent in the basement den playing Mighty Bomb Jack on the original Nintendo Entertainment System. It was not a particularly interesting or good game, to say the least, and I was not very good at it. It did, however, possess a most curious feature for a video game; players were sometimes “punished” for doing too well.
Normally, video games reward the most enterprising players. You strive to collect more coins or kill more bad guys.2 This was not the case with Mighty Bomb Jack where the goal was simply to do just well enough. Lest one forget this, you’d soon be reminded when the following message appeared on your screen:
The first time I had to “go to the torture room” it was a shock, much like it was the second or third or hundredth time. No one ever suspects they’ll be punished for being overly ambitious (particularly in America).
The experience was frightening. This game was released in 1986, one year before Oliver Stone’s Wall Street. The cognitive dissonance was palpable. Gordon Gekko said “greed is good,” but Mighty Bomb Jack declared that it certainly was not. They both couldn’t be right.
It turns out that Jack was preparing me for the real world even if I didn’t quite recognize it for a few decades.3 As others have pointed out, chasing yield and/or performance is a foolhardy way to try to make money. This is the investment equivalent to trying to collect too many coins in Mighty Bomb Jack. The point is that one can still win the game just by doing sufficiently well; you simply need “to not be too greedy.”
1Remember how Daniel LaRusso learned the martial arts in The Karate Kid?
2There is no corollary in investing; most efforts to maximize returns backfire. In Winning the Loser’s Game Charles Ellis writes, “Many investors make the mistake of trying too hard, striving to get more from those investments than those investments can produce—typically by borrowing heavily on margin to increase leverage—and thus courting some serious disappointment. All too often, trying too hard is eventually expensive because taking too much risk is too much risk”
3For more on how a healthy diet of quality pop culture can make us better people, read Steven Johnson’s Everything Bad is Good for You.