The Secret to Life is…

By: Yale Bock

In today’s advanced technological world, the world moves faster. Information is available in milliseconds and makes us more productive. Still, I have my daily routine, which remains consistent, and I would imagine that holds for most people. Your habits and structure are ingrained in when and how you do things, and the quality of your work is affected by how things are set up. As an example, the person who works quietly in the calm of the early morning might have a completely distinct experience from someone who is surrounded by an active work or family environment in the afternoon or evening. People have their typical schedule and often do not stray from it, with the occasional event altering what takes place.

From a statistical point of view, most of the time we exist at the mean, or the average. We are operating in an area which is usually comfortable, and we can depend on. An emergency would be considered a two- or three-standard-deviation event, like going to the hospital because of an accident. It happens infrequently, and it often raises our stress level way beyond what we want. Who hasn’t experienced the stress of that phone call when you must drop whatever you’re doing to make the pressure-packed ten-minute drive to meet some deadline you had not ever considered? Not fun.

Why do I mention this, and how does it pertain to investing? It has to do with what one is expecting out of your assets. As an example, if you own a bond (fixed income instrument) of any kind, you can expect interest payments on certain dates, depending on the specific issue. When the bond matures, you know the original principal amount being repaid. When it comes to stocks, if you are paid a regular dividend, it is sent either quarterly or semi-annually, so you can expect that money every three or six months. In both examples, the payments depend on the operations of the specific entity, either a business or a government organization, to generate the income that makes the distribution.

The operations of these entities have historical operating metrics that are factual. We obtain this information for periods to help us understand how well it grows and what events took place to change the nature and size of the enterprise. When you look at any entity, you should be able to create an expectation range of what its operating performance will fall in, especially from a revenue and margin perspective. If you understand these probabilities and ranges, you then compare them to historical performance to get a better understanding of how the business is executing. We then look at its nearest competitors; well, now we might have improved our chances of owning something that is operating more efficiently. The key point to emphasize is that most of the time, what you own will operate in a typical range, maybe a little better, maybe a little worse. Much of the time, companies are not firing on all cylinders. They are not going to grow revenues and profits at over 20%. Expecting anything different is just going to lead to disappointment.

It is interesting to see how different corporate executives communicate their expectations to the investor community. Obviously, some of that depends on the size and strength of the company they represent. Small companies are starved for investor attention and capital and often feel the need to use whatever means necessary to create an audience. It is my experience that executives who are bombastic and create outsized expectations are to be avoided, as investors hate those who overpromise and underdeliver. Similarly, just because an executive is understated and reserved does not mean they deliver excellent results. The most professional approach is to present the company, its potential market, the range of expected results for the year, and how they evaluate their own performance based on what they have communicated in the past. Sometimes they will do better, sometimes worse. Regardless, they are clear about the opportunity, how they plan to capture it, and how well they have executed on it.

From the investor perspective, the key is to not have excessive expectations for any company or your portfolio. Expecting 20-30% improvement each year, or huge returns in any one year, is just setting yourself up to be upset. Yes, we want our companies to try and achieve those results, but expecting them is not a rational approach. Additionally, reacting to outsized moves in markets or individual positions based on a single day needs to really be tempered with an understanding of the company within the context of the entire portfolio. Yes, we want to be opportunistic when the market gives you a good look at a great business, but you want to do so on your terms.

Remember, in most holdings, you want to own the asset for a long time frame, not for a quarter or year, but when they are good holdings, for many years or even decades. Munger always said the secret to life is low expectations, and they are good words of wisdom to remember and adopt. Not easy, but nothing worthwhile is.

Originally posted on October 1, 2026 on Y H & C newsletter/ blog

DISCLOSURES

Y H & C Investments may have positions in companies mentioned in this newsletter. Nothing in the newsletter should be taken as an offer to buy or sell individual securities. It is the responsibility of each investor to research the investments mentioned so they can decide on the appropriateness and suitability of the investments consistent with their risk tolerance, risk constraints, and return objectives.