Stockdale Paradox
I want to tell you a story about one of my heroes—Admiral James Stockdale, who was shot down in the Vietnam War. He was the highest-ranking officer in the infamous Hanoi Hilton POW camp. For seven years he was tortured at random, with no prisoner rights, and no release date. Imagine spending seven years unsure whether you would ever see your family again.
Once, his captors attempted to videotape him in good health, but Stockdale deliberately used a stool to batter himself and a razor to disfigure his face.
I first stumbled upon this American patriot while reading Good to Great: Why Some Companies Make the Leap…and Others Don’t by Jim Collins.
Good to Great has been a foundational business book for me over the years. I picked up a copy in 2006 while still in college and have read it now five times cover to cover, and certain sections countless times. Jim Collins started as an entrepreneurship professor at Stanford and challenged all his students to take the path less traveled and to “bet on themselves.” Like all great students, they pushed back and said, “What are you doing, professor? It doesn’t look like you are betting on yourself.”
So at 36, he burned the boats and left a cushy job at Stanford to create his own endowment. He became a full-time researcher and author. Good to Great provides clear examples of how to think about your business and make better decisions. His team found and studied ten publicly traded companies that outperformed the market tenfold,and constrasted that data withten comparison companies that did not make the leap. This is no easy task and it required years of research and thousands of man-hours. The observations learned from this research are interesting. I don’t want to give away all the findings in the book, but I want to talk about one foundational concept: The Stockdale Paradox.
What can we learn from Admiral Stockdale? How can we apply these lessons to investing? My favorite exchange between Mr. Collins and Admiral Stockdale takes place in the mahogany-lined office on the Stanford campus.
Mr. Collins, a master of questions, asked Admiral Stockdale, “Who did not make it out [of the POW camp]?”After a long pause, Stockdale responded, “Oh, that’s easy, the optimists.”
This sounds counter-intuitive. Don’t you need to be optimistic about the future to survive? Who wants to be a pessimist? But Admiral Stockdale continued, “The optimists.Oh, they were the ones that said, ‘We’re going home by Christmas.’ And Christmas would come and go. Then they’d say, ‘We will be home by Easter.’ And Easter would come and go. And then Thanksgiving, then it would be Christmas again. And they died of a broken heart.”
Then Admiral Stockdale said, “This is an important lesson. You must never confuse faith that you will prevail in the end—which you can never afford to lose—with the discipline to confront the most brutal facts of your current reality, whatever they might be.”
Wow, this last line still gives me chills. What an American patriot! What a leader!
This key mental model can be applied to almost everything in life. When it comes to starting and running your own small business, this mindset is paramount. We must have faith that we will prevail in the end or else why get started? But we must face the brutal reality. How do you find customers? How do we refine our product? How do we market?Aside from being a practical mental model, it is just sodamn inspiring. Today, we look up to sports figures who have shown great discipline and dedication to a craft, but nothing can hold a candle to how men respond when their lives are on the line in service of their country.
What can we learn from Admiral Stockdale and how can we apply this to our businesses and to investing?
1. People are not stupid. Don’t just tell them it is all sunshine and rainbows. Cast a vision of success, how you plan to get there, but then tell the brutal facts. Great team members want to play for a great team.
2. Be prepared for the grind. It takes time to build anything great in life and a business is no different.
Never give up hope.The paradox of never giving up hope while facing the facts is where the magic happens.
