In 2008, hedge fund manager Guy Spier sat in front of Warren Buffett at a charity lunch. According to Spier, Buffett asked him a question he would never forget:
Would you prefer to be considered the best lover in the world and know privately that you’re the worst — or would you prefer to know privately that you’re the best lover in the world, but be considered the worst?
The intention of Mr. Buffett’s question was to highlight the difference between having an internal or external “scorecard” in life. It is a revealing thought experiment. Ask yourself honestly: which would you choose?
In life, people with internal scorecards are mostly motivated by internal drivers such as their personal passions or a drive for excellence, whereas those with external scorecards tend to measure success through external markers such as a high salary or owning a luxury car. Warren Buffett argues that it is more fulfilling to be driven by the former. We tend to agree.
Coming out of university, I was an external scorecard kind of girl; whether it was because of going through business school or simply my age, I’m not sure, but I was motivated by conventional social metrics such as obtaining status and money. I was young with nothing to my name except for a desire to make my mark. Quite simply, I didn’t know any better.
This orientation quickly shifted once I landed in Calgary, a few bags in hand, ready to start in my role as an equity analyst at Mawer. Here I encountered a company culture that was very alien from anything I had previously experienced in undergraduate business school. On top of this, I faced a number of unfortunate and difficult obstacles in my personal life. As a result, I transitioned to being more motivated by internal, rather than external, drivers.
As I reflect on that shift, I am struck by how it seemed to have happened. Not until I joined Mawer was I even aware that a dichotomy existed in how one could measure their success. But once I was here, the benefit of acquiring an internal scorecard became obvious. Moreover, it was far easier to adopt one when my peers shared this outlook themselves. Around me were people who loved investing for investing’s sake and who seemed to pursue excellence simply for its own virtue. Public accolades seemed to make many of them uncomfortable, and that was new to me. I was lucky to be exposed to this.
I share this story for a couple of reasons (neither of which is to give thanks to my team who deserve the recognition but would almost certainly cringe from it). The first reason is simple: I hope to highlight the value of the internal scorecard mindset in the investment community. What is more likely to yield good investment decisions over time—an investor who is driven by status and a need to look “right” or an investor who is driven by the desire to uncover truths and has a passion for the entire process? I suspect that internal scorecards enable better decisions than external ones because there are fewer distractions (ego, money, status, fame, etc.) to get in the way.
The second reason has to do with this time of the year. With the holiday season still lingering in my mind, I am reminded of Dickens’ classic, “A Christmas Carol,” and the story of Scrooge—a man who changed his measuring stick in life after being visited by three “attitude adjusters” in his sleep. Perhaps the New Year is a good time for all of us to reflect on the measuring sticks we use.
The internal scorecard is one of those quiet ideas that rarely gets the attention it merits in the investment community, and yet its widespread adoption could make a real, positive difference. If I had one New Year’s investment resolution to recommend for everyone this year, it would be that we all choose to be known as the worst lovers in the world.