Success Comes With a Price Tag

Like everything, even success comes with a price tag. The key is figuring out what that price is and being willing to pay it. The problem however is that the price of a lot of things is not obvious (or remain hidden) till the very end.

If you want to ace in your exams, you have three options: you can either study for the exam, not study and still give the exam, or cheat in the exam. Even if we ignore ethical reasons, most people would avoid the third option because the consequences of getting caught outweighs the upside.

But say you want to start a business, make a million dollars, sell the business and retire in peace after 10 years. Does this reward come free? Of course not! The world is never that nice.

There’s a price tag, a bill that must be paid. In this case the price is a lot of uncertainty, seemingly endless struggle, a never-ending taunt from a world which gives great success and takes them away just as fast.

To give an investment example, the India Sensex Stock Market Index grew on average ~16.8% per year from 1979 to 2021, which is great! But the price of success during this period was dreadfully high. There were times when the market was at least 25% below its previous all-time high. This one time it fell by 128%.

As Morgan Housel writes, “Like everything else worthwhile, successful investing demands a price. But its currency is not dollars and cents. It’s volatility, fear, doubt, uncertainty, and regret—all of which are easy to overlook until you’re dealing with them in real time.”

Netflix stock returned more than 35,000% from 2002 to 2018, but traded below its previous all-time high on 94% of days. Of the 242 investors Howard Schultz approached, 217 rejected his cafe idea that eventually turned into Starbucks. Meesho, an Indian social commerce unicorn, valued at $4.9Bn wasn’t able to raise seed funding during their time at Y Combinator. The bigger the returns, the higher the price.

People often say things like, “Had you invested $10,000 in Tesla 10 years back, or had you invested $1,000 in Bitcoin 10 years back…” but it doesn’t work that way. If you had put $100 into bitcoin back in the day, you’d have sold it when it reached $1,000. Maybe $10,000. Nobody (in the right mind) would have held on to $100,000 in the hopes it’d turn into a million. The price is unaffordable!

The inability to recognise that everything has a price can tempt us to try to get something for nothing which, like stealing, rarely ends well.

General Electric was the largest company in the world in 2004, worth a third of a trillion dollars. It had either been first or second each year for the previous decade.

Then everything fell to pieces.

The 2008 financial crisis sent GE’s financing division—which supplied more than half the company’s profits—into chaos. It was eventually sold for scrap. Subsequent bets in oil and energy were disasters, resulting in billions in writeoffs. GE stock fell from $40 in 2007 to $7 by 2018.

One of its many faults stems from an era under former CEO Jack Welch. Welch was a rockstar CEO. He became famous for ensuring quarterly earnings per share beat Wall Street estimates. He was the grandmaster of gaming the system.

If Wall Street analysts expected $0.25 per share, Jack would deliver $0.26 no matter the state of business or the economy. He’d do that by massaging the numbers, often pulling gains from future quarters into the current quarter to make the obedient numbers salute their master.

Under Welch’s leadership, stockholders didn’t have to pay the price. They got consistency and predictability—a stock that surged year after year without the surprises of uncertainty. Then the bill came due. GE shareholders suffered through a decade of mammoth losses that were previously shielded by accounting manoeuvres. It’s often said that more fiction has been written on Excel than Word. GE’s case is a classic example. The penny gains of Welch’s era became dime losses later.

The world does not look kindly upon those who seek a reward without paying the price. As Karl Mordo says to Dr. Strange, “The bill comes due. Always!”

It sounds trivial, but thinking of volatility, stress, fear, doubt, uncertainty, and regret as a fee rather than a fine is an important part of developing the kind of mindset that lets you play the game well.

Success is never free and never will be. It demands you pay a price, like any other product. You’re not forced to pay this fee. You can get out of the game and go live in the woods. You might still have a good time.

But if you are planning to get higher returns on your life’s investment (in terms of money, fame, success, whatever), uncertainty is the cost of admission into the game.

There’s no guarantee you’ll make it. But if you view the admission fee as a fine, you’ll not be able to enjoy the ride.