“October: This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August, and February.”
― Mark Twain
“I bought a company in the mid-’90s called Dexter Shoe and paid $400 million for it. And it went to zero. And I gave about $400 million worth of Berkshire stock, which is probably now worth $400 billion. But I’ve made lots of dumb decisions. That’s part of the game.”
—Warren Buffett (one of the world’s richest men)
Many successful people have had financial failures, including those pictured on our money.
The point is not to aim raspberries at the famous (well, not too much). The real lesson is that failing does not matter. It is how you react to failure that counts.
I hope that some of these accounts inspire you.
It turns out that some of our best Presidents have failed in their financial lives. You would think that the experience of leading the nation would have helped them. The job should give perspective on the risks and rewards of various endeavors, including investing. Yet two presidents went broke. It was their ability to persevere that helped to get them through.
THOMAS JEFFERSON
We honor Jefferson by putting his pictures on nickels and two-dollar bills. His monuments are all over the country, and rightly so. He was a major force in the drive for independence from Britain. He was renowned as one of the finest scholars of his age and was the primary architect of the Declaration of Independence. Jefferson was an inventor, entrepreneur, and one of the greatest thinkers that the nation has ever produced.
All of that intelligence, innovation, and hard work could not keep him from facing economic disaster toward the end of his life. For instance, he tended to do his mental calculations about his expenses while in national office. Unfortunately, he underestimated what those were. He sometimes spent beyond the limits of his income.
Jefferson also had most of his economic eggs in one basket—land. Ironically, the Louisiana Purchase, which he supported, increased the supply of land and depressed prices. It was one of the main reasons he went broke.
Finally, Jefferson assisted family members when his finances were tottering. As noble as that was, it was a mistake.
His legacy is that he persevered, and helped found a nation.
U.S. GRANT
Another president who had financial difficulty was U.S. Grant. He is depicted on the $50 bill and was victorious as commander of the Union forces during the Civil War. He led the country for two full terms; his leadership ability and courage are legends.
However, after he left the presidency, he met the Bernard Madoff of his day–Ferdinand Ward. Grant went broke after Ward robbed him blind. As a razor-sharp judge of character, it is hard to believe that Grant was taken in. However, the few sociopaths who do inhabit the investment community can be consummate actors and liars.
Fortunately, Grant’s widow was saved from the poorhouse by the publication of Grant’s memoirs—a brainchild of Mark Twain, the famous humorist.
Of course, shortly afterward, Twain went bankrupt himself.
MARK TWAIN
An immensely gifted writer, he also spent as much as he made. When he branched out from writing and went into business, his lack of experience hurt. Twain backed a failed publishing company. And then, he invested in a costly new invention that ultimately did not work.
Years later, he repaid his debts by cutting his budget to the bone and using the profits from a successful worldwide tour.
So, what is the lesson here? Easy: don’t give up. Even the worst financial pratfalls can still earn you a portrait on currency.
PERSEVERANCE AND GRIT
In a groundbreaking study of many successful people in her book Grit, Professor Angela Duckworth found one factor that ranked above all others as predictive of success. It was the determination to stick to and finally achieve long-term goals. That grit trumps natural aptitude and intelligence.
It almost appears as if competition and reversals strengthened internal motivation and performance in high achievers and helped them achieve their goals.
Still, you may have noticed that Mark Twain had grit but never got his face on money, right? Wrong. His face is on two commemorative coins minted in 2016.
SUMMARY:
- Everyone makes mistakes. Don’t expect to be perfect. After all, Jefferson’s legacy is intact, Twain emerged from bankruptcy, and U.S. Grant’s family fared well from his memoir income.
- Grit and determination are the most important factors for success. Everyone fails; what matters is that you keep going when it happens.
ACTION STEPS:
- Make long-term plans and stick to them, even if you fail in the short term.
- Delegate your weaknesses to others who are better at certain skills (accounting, budgeting, organization)–and keep tabs on them. You do not have to be good at everything.
- Ask for help if you need it.
Disclaimer: consult with a financial professional before taking any steps outlined here. Not all advice may be suitable for your circumstances or investment style.
Photo: Mark Twain, 1907. Library of Congress