cynical investing

Cynical investing

At Pear Tree Property, we’re gearing up for our mid-November investment round. That means I’ve got to put on my salesman persona (which I’m woefully bad at).  One query I’m oft asked is “how do you determine what to buy?” My typical answer talks about about focusing on cash flowing properties in rural areas. While this is true, I want take today and discuss our overall strategy: what I call cynical investing.

The power of positive thinking…is there any?

I’m nearing the end of a, thus far, phenomenal book titled “The Antidote: Happiness for people who can’t stand positive thinking” by Oliver Burkeman.  Not only do I adore the dry, sarcastic, cynical tone but, the man makes some great points.

It tackles a very fundamental problem: how can you be happy?

Many self help writers and lecturers argue that to be happy, you should think positively.  Banish those pesky negative thoughts and your days will be filled with sunshine.  Sounds like common sense, right?  The real question is: Does it work?

Nope.  It actually makes matters worse.

When you suppress that negative voice in your head, you detach yourself from reality.  No matter how much you wish for it, your life won’t always be filled with roses.  Focusing on the best possible outcome sets your expectations too high.  Unless you’re very very lucky, your dreams won’t come true and you’ll feel unfilled and frustrated.

Picturing yourself in a Ferrari won’t give you a Ferrari; however, it will make you sad you don’t have a Ferrari.
Wishing you were with Jennifer Lawrence/or James Franco (are those the new “it” people, I don’t keep up with these things) makes you disappointed you’re not.
Envisioning living in that mansion makes your house feel cramped.

If thinking positively worked, why are there so many different self help books telling us to do the same thing?  Wouldn’t a handful do?

Happiness through cynicism

What if we embrace the negative thoughts instead?  Expect the worst to happen and bank on catastrophic events destroying everything you’ve worked towards.

You’ll soon find your mind is very good at exaggerating for the worse.

Try and remember what you were worrying about one year ago; the things that kept you up at night and raised your blood pressure.  How did they shake out?  Was it as bad as you thought it would be?  Probably not.

When you anticipate the worse, reality is almost always better.

Your life will won’t be filled with disappointment, it’ll be filled with pleasant surprises.

Get familiar with your negative thoughts.  Explore the worst outcomes and brace yourself where applicable.

What does this have to do with real estate?

If you want to a slew of evidence and to further explore Mr. Burkeman’s point of view, check out his book.  For the purposes of this article, suffice to know that I generally agree with him and I’m going to spend the rest of the time chatting about what this has to do with real estate investing.

How can we use this principle?

Simple, replace “happiness” with “financial independence.”

I call it cynical investing.

When you’re participating in cynical investing, don’t focus on what might improve your situation.  Focus on what might make your life a living hell.

Sure, if you buy an apartment building and the market goes up 50% next year, you’re going to make some money.

You also might win a $100 million PowerBall jackpot, but you’re not going to factor that into your cash flow are you?

Ask yourself:

What if the market goes down by 50%?
What if the mafia makes you an offer you can’t refuse? (Is that still a thing?)
What if the largest employer in your town shutters their doors?
What if a meth lab is discovered on your premises?

If these things happen, how will you fair?  Will you be overextended?  Will you go bankrupt?  Will you be able to weather the storm?

The goal is financial independence

Most likely if you’re reading these words, you’re seeking financial independence.  What does that mean?

If you can’t survive the largest employer in your town imploding, then you’re dependent on that employer.  By definition, that’s not independent.

cynical investing helps avoid this

Plan for the worst.  If you build your Empire expecting catastrophic events, then every uneventful year gives you extra capital you can use to help you reach your goals faster.

Take that money and invest it (again while expecting things to go bad).

Wrap It Up: Cynical investing to reach your goals

In your walk through life, if you expect the worst in every situation, your days will be filled with pleasant surprises.

In your walk down the path towards financial freedom, if you invest planning on the worst outcome, you’re days will be filled with bonus money!  That bonus money can be used to reach independence sooner.

Persistence is the key.  Never forget the Old Man and the Mountain.

At Pear Tree Property, we’ve used this model from the beginning.  It’s this thinking that led us to avoid debt, grow sustainably, and closely monitor every step of our progression.

We’re not going to grow for the sake of growth.  If we can’t invest the way we want to, we’ll stop buying.

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During Kenny's decade in finance he bought many single family rentals in rural areas, as a hobby. Along the way, he talked some brave souls into joining him as investors and recently retired from finance to take his hobby to the next level. Keep up to date with everything he's doing on twitter!

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6 thoughts on “Cynical investing

    1. Kenny Estes Post author

      Brilliant. I’ll taken reasoned approaches over wishful thinking (which is what that article seems to be) any day.

      “The key to happiness is being positive all the time”

      That’s not even possible. You get into this negative cycle of feeling negative, then feeling more negative that you’re feeling negative.

      I suppose it sells books though, telling people they have to accomplish something they can’t. Just one more book and you’re sure to reach your goal!

  1. Mark Ferguson

    Hi Kenny, that is my website and article about being positive. I actually agree with planning for the worst. One of my favorite sayings is plan for the worst and hope for the best. Being positive is not about ignoring the negative or pretending it does not exist. Being positive is about trying to feel a little better than you do right now.

    For some people being cynical and sarcastic makes them feel good about themselves. The point is not to run around singing an whistling all day long, the point is to feel good about yourself, what you have done in the past, what your are doing now and what may be in store for the future.

    I think you may be misinterpreting negative for cautious. In my mind negative is telling yourself how horrible you are at investing, how horrible you are at relationships, how much the world is against you and how you have no chance because you are unlucky. Planning for bad things or unknown circumstances is not being negative.

    If you read interviews or books of just about every extremely rich and famous person you will find a very common theme. Almost all of them promote being positive and looking at the bright side of life. Just about every extremely successful person I have met in real life has been the same way.

    FYI, I don’t have any books to sell on this subject. :)

    1. Kenny Estes Post author

      Hey Mark,

      Thanks for the comment.

      The big issues I have with your argument is that you’re conflating two very distinct ideas. One is “being positive” and the other is “being happy.” Once that connection is made, it’s easy to conclude that if you work really hard at to be positive, you’ll become happy…which is exactly what your article argues.

      It’s this idea which is counterproductive (and impossible). You are not going to be able to be positive all the time. However, if you create this pressure that you SHOULD be be positive to be happy, you’ll end up in a worst situation than accepting that sometimes you will be negative.

      I would go so far as to argue this negativity is a good thing. Embrace it. Strive for understanding the emotion, and yourself. All of the techniques presented in your article are geared towards avoiding the issue. If you’re worried about something, ignore it!

      Your list of ways to dealing with negativity are:
      – listen to motivational tapes
      – do something fun
      – think a happy thought
      – change topics
      – listen to a song
      – try look on the bright side

      We can summarize this approach as “bury your head in the sand and hope the problem goes away.”

      Nowhere in that list is what I feel is the most important thing to do: understand the problem. Delve into and try and figure out what the real issue is. How bad are things, what are the implications?

      Regarding your point on reading interviews with successful people and how they’re all positive. This is classic logical fallacy. What about all of the people who aren’t rich? What would they say in an interview? It’s very few people indeed who would argue they’re super negative and down on themselves. Many of the biggest failures in history were super positive about what they were doing and confident they would succeed….to a fault.

      That argument is the same as saying because rich say they brush their teeth in interviews, brushing teeth makes them rich. It ignores the fact that pretty much everyone brushes their teeth.

      I would even class myself as fairly positive. The difference is I don’t view “being positive” as productive goal. I don’t think it’s a failure to be negative, something we should try and “fix” right away. Indeed it’s worthwhile to embrace negative thoughts and analyze them, as this article highlights.

  2. Mark Ferguson

    My main point is to try to feel better than you do right now. I am a big believer that being more positive about things will make people happier.
    Part of being positive is removing pressure to feel a certain way, removing stress and relaxing. Maybe I could have done a better job expressing what I really meant. It is also hard to express a feeling or way of thinking in an article. Maybe that is why there are so many books on the subject!

    if you read my article one of the main points I make is to try and understand why you are feeling bad or what is stressing you out. This is the first step, I certainly am not trying to say to bury what is bothering you. On the contrary I think it is a good thing to analyze what is bothering you or making you feel bad and then work to make the situation better by using my techniques or whatever works for you. I think we all work and think better if we are in a good mood than if we are stressed or worried or hurried.

    If you are trying to feel positive, can’t do it and that makes you feel bad then that is a major issue. There are probably much deeper issues that need taken care of before feeling positive is a priority. The goal should be to feel a little better each day and week and etc. if you are in the dumps and depressed, the next step is not going to be to feel happy, it is going to be to not feel quite so bad, or to get angry or mad. any emotion that is better than depressed. Then slowly work your way up the scale until you feel good.

    I don’t think of anything as a failure, I think of it as a learning experience. Thomas Edison said he didn’t fail to learn to create the light bulb 10,000 times, he learned how not to create it 10,000 times. if someone isn’t positive it doesn’t make them a failure, it just means there are different ways to do things and think. I happen to think being positive creates better results. If i look at the people in my life who are extremely negative about things, they always have issues, they never have money and someone is always trying to screw them. The positive people tend not to have those problems. A positive person may not even see those same issues as problems, but challenges.

    There is no scientific way to who exactly why the rich are rich, but it is a very common theme and a reason they give for success. I don’t see too many rich people giving brushing teeth as a reason they succeeded. i tend to listen to rich people more than people who are not successful.

    Anyway good discussion! I don’t think we are super far off in our thinking.

    1. Kenny Estes Post author

      Thanks for the comment Mark.

      I think we differ on some points but not on others. This particular topic is a concern of mine because, as I’ve said a few times ( :) ). The idea that you should always being working towards being positive is at best wrong, and at worst dangerous. In terms of happiness, health, and goals.

      Anyways, at least we understand where we differ. :)




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