The Difference

My friends in New York love to point out there’s a difference between a slice of pizza in the Big Apple and a slice of pizza everywhere else in the world.

I’ve always been of the opinion that pizza is almost always good no matter where it’s from but after sampling some pizza in New York City my opinion may have begrudgingly changed on this topic in recent years.

As much as I hate to give them the satisfaction, yeah, there probably is a difference between pizza everywhere else and pizza in New York.

Here are some other differences worth pointing out:

The difference between a portfolio and a plan. Nick Murray wrote the following in his book Simple Wealth, Inevitable Wealth:

A portfolio is not, in and of itself, a plan. And a portfolio that isn’t in service to a plan is just a form of speculation; it can have no other goal than to beat most other people’s portfolios.

But “outperformance” isn’t a financial goal. An income you don’t outlive – to cite one critical example – is a financial goal. If your portfolio “outperforms” mine, such that I run out of money when I’m 76, and you don’t run out of money until you’re 82, it isn’t going to matter much when we’re both 85, sitting on a park bench without two nickels to rub together between us.

I wouldn’t go so far as calling portfolios a commodity quite yet but it is becoming increasingly easier to build low-cost investment portfolios these days.

No matter how easy it becomes to build a portfolio it’s always going to be much harder and more important to build a plan because portfolios are about performance while plans are about behavior.

The difference between good advice and effective advice. Good advice is everywhere. You don’t have to look very hard. People generally know what they have to do to improve their health, finances, or lifestyle. But knowledge alone is never enough to change behavior.

Good advice tells you how to succeed at something while effective advice shows you how to succeed. Good advice is about tactics while effective advice helps you build systems.

The difference between a good product and a good business. A good product can help solve people’s problems, keep them entertained or provide a valuable service. But there are plenty of fad products that have no staying power.

Staying power requires building an actual business, which goes beyond products or services to people, processes, leadership, and organizational culture.

My college roommates were always coming up with (what they thought) were good product ideas. But even if they manufactured those products there’s a good chance the businesses would not have succeeded because there was never a business plan attached.

A product is an outcome. A business is a process and process gives you a better shot at longevity than a singular outcome.

The difference between a good company and a good stock. Professional money managers are adept at making excuses when they underperform the market.

Everyone knows even the best money managers will have periods where their style is out of favor but for some reason, coming up with excuses makes both investors and portfolio managers feel better about lagging their benchmark.

I know this because I’ve read hundreds of quarterly manager updates in my career. When all else fails, the go-to excuse for underperformance is “this was a low-quality junk stock rally so our more high-quality businesses were left behind.”

The insinuation here is all those other investors who bid up low-quality businesses must be idiots. It’s the perfect excuse because it makes you feel smarter than everyone else even when they’re making more money than you.

But sometimes low-quality businesses can be a great investment at the right price or valuation. And sometimes high-quality businesses can be a terrible investment at the wrong price or valuation.

Everyone already knows who the great companies are. The challenge comes from figuring out the value of those great companies and the expectations embedded in their price.

The difference between telling other people what to do and actually doing it yourself. On this week’s podcast, Michael talked about how he would like to improve his fitness:

Making your fitness goals public can help from a behavioral perspective because it’s a way to hold yourself accountable.

The downside to this is everyone has an opinion about how to improve your health. Our inbox was packed this week with people giving Michael advice.

You definitely need to go full keto.

Did you try counting your macros?

Three words: Cottage. Cheese. Diet.

Intermittent fasting is the way to go

Just cut out the carbs.

My brother lost 27 lbs. on a strict juice cleanse.

Some of this stuff may be helpful and some of these people have probably seen results from following this advice. But you know there’s always someone who offers a fitness regime to others that they themselves have not had the discipline to follow.

It’s always easier to give advice to others than to take that advice yourself.

Further Reading:
Mindless Eating & Finance

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