The Stockdale Paradox: Assume that you will win in the end, never forget today

What does a marathon runner have in common with a prisoner of war from Vietnam?

Why is long-term investing so much better than short-term thinking?

The answer lies in the Stockdale paradox.

The Stockdale Paradox Explained

Who is Stockdale and what is his paradox?

James Stockdale was an aviator in the US Navy, eventually rising to the rank of admiral and even running for US Vice President in the 1992 election (on Ross Perot’s ticket).

It was during the Vietnam War Stockdale’s fighter plane was shot down and he spent seven years as a prisoner of war in the infamous ‘Hanoi Hilton’ prison camp.

It was during these challenging seven years that the ‘Stockdale Paradox’ was born. I won’t go into it gritty details of Stockdale’s captivitybut I think you’ll find it quite eye-opening.

Despite repeated torture during those seven years, Stockdale survived as an unbroken man. He remained a leader for his fellow inmates. He did not reveal any vital intelligence information.

How did he do it? Stockdale continually reminded himself of two essential philosophies. But because these two ideas are somewhat at odds with each other, they are now known as the Stockdale paradox:

1. Never lose faith that you will triumph in the end.
2. Maintain the discipline to face the most brutal facts of today’s reality.

That’s it. Holding both thoughts at the same time is the Stockdale paradox.

Two opposing ideas in the Stockdale paradox

Part 1 of the Stockdale Paradox is heap. Stockdale believed that if he ever lost faith that he would ultimately be free, he would lose his purpose and quickly fade away.

But hope is different from blind optimism. If Stockdale were unable to cope with his current situation, he would not be able to protect himself against the harsh conditions of everyday life.

That’s why part 2 of the Stockdale paradox exists realism. For seven years, Stockdale woke up knowing he might be tortured that day. There is no sugar coating that reality. But in the back of his mind he continued to believe that he would eventually be free.

Hope versus realism.

Copper nails versus boundless optimism.

It’s one day at a time versus twenty years from now.

Consider both circumstances at the same time? It’s not easy. It is certainly paradoxical.

Throughout Stockdale’s time in Vietnam, this mental paradox allowed him to survive intact.

How to do We Apply the Stockdale paradox?

The Stockdale Paradox is easy to talk about, but difficult to implement.

It’s easy to say, “I’m confident that one day I’ll be 25 pounds lighter. But today I have to do my 1-hour workout.”

Or,

“I’m confident I’ll have a great retirement. But right now I have to accept that my portfolio has fallen 4% in the past month.”

We all have that internal communication system that convinces us that there is an optimal version of ourselves that achieves every goal and does the hard work to achieve that goal.

But let’s be realists. That future optimal version requires hard work day after day after day.

That’s why the Stockdale paradox encourages us to be hard on ourselves. It’s not easy to stay optimistic when you’re in pain. It is essential never to confuse long-term optimism with the current situation.

Stockdale and personal finance

When do you want to retire? What do you want out of life? What actions are needed to get there, and how long will it take?

These questions have answers that could set you back 30 years in your future. It’s about journeys that won’t end anytime soon. While on the one hand that makes them almost elusive, it also means that they will be defining moments when you Doing achieve those goals.

When someone says: “I just assume a return of 10% for the next forty years.”

…that’s the heap!

I get it.

But I also want them to understand the daily and monthly turmoil that will actually impact their portfolio. It won’t be easy. They must be realistsat.

But our life is not a prison camp

I am also reminded of the story of Viktor Frankl. The Austrian psychologist’s experience in a Nazi concentration camp helped him solidify incredible ideas about the human psyche.

Namely that you can never give up your own ability to respond to a situation. Even when faced with the ultimate human horrors, you can choose how you respond. Frankl noted that those who were able to find a sense of purpose – whether it be about future goals, love of family, spiritual belief or personal worth – were more psychologically resilient.

That rhymes with the Stockdale paradox.

Stockdale and Frankl’s stories can leave you heartbroken. But they also remind us of the indomitable human spirit.

You have to be realistic with yourself. Every day.

You must also believe that you will achieve your goals in the long run.

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