In Homer’s Odyssey, when Ulysses is sailing home from Troy, he is warned that he will sail past the island of the Sirens. Their singing is fabled to be so compelling to sailors that – unable to control their rapture – they jump overboard to their deaths.
Residents of the United States, please read this important information before proceeding
Please read this important information before proceeding.
This story holds a very close parallel to the experience of investing. If you try to achieve optimal risk-adjusted returns without being aware of your probable emotional responses along the journey, you’re likely to end up failing, and failing expensively. Unlike his predecessors, Ulysses understood that he was human and fallible, and probably unable to control his response to the Sirens’ call. So he asked his crew to bind him to the mast with ropes. And so, when the time came, he could hear the Sirens’ call, but do nothing about it.
In short, he took practical steps to ensure that he had sufficient emotional controls in place to withstand the short-term pressures, and so make it to the end of his journey.
Their actions had costs – the sailors missed out on hearing the wonderful Sirens’ song, and Ulysses had to endure the agony of being unable to act on his desperate desire to jump – but these costs were a small price to pay to avoid the, admittedly substantial, behaviour gap (death), and attain the best possible anxiety-adjusted returns.