Expertise Does Not Shield You From Failure

Psychology, Beginner

My news feed recently contained a trio of interesting articles that had little to do with finance but shared a theme that is quite universal — the failure of the best of us. But rather than the typical stories of deliberate fraud and tragic mistakes that are sadly all too common, these are a more nuanced grouping that taken as a whole offer an interesting perspective on something many of us take for granted.


So if you think you have everything figured out or have hired the smartest minds to do it for you, read on. You may learn something new about risk and adjust your expectations in the process.

LK-99 loses its charge

LK-99 isn’t a superconductor — how science sleuths solved the mystery — Nature

In late July, a Korean team at the Quantum Energy Research Centre published preprints claiming that a substance they created called LK-99 is a room temperature superconductor. If you’re not familiar with that term, just think of it as a miracle material that scientists have been chasing for decades that has the potential to revolutionize all electronics and usher the beginning of a new efficient energy revolution. It might genuinely be the scientific discovery of the century that would earn a guaranteed Nobel Prize.

Unlike many discoveries that take years to validate, however, the most fascinating thing about LK-99 wasn’t its future potential but its immediate replication possibilities. Anyone with the right equipment and a bit of know-how could follow the recipe and make a sample for themselves. So the race began, as material scientists around the world dropped everything and started cooking batches. And it was all documented in real time on social media, with various accounts sharing videos of levitating crystals exhibiting certain diamagnetic properties associated with superconductive materials.

Well, just a few weeks later we finally learned that LK-99 was indeed a bust. Those fancy levitation tricks were caused not by superconductivity but by other material flaws in the crystals, and the desired superconductivity properties just didn’t measure up. After a frenzied few weeks, the hype ended just as quickly as it started.

Russia moon lander crashes

Russia’s first lunar mission in decades crashes into the moon — CNN

Beyond our own planet, there has been a new space race of sorts percolating between India and Russia to land a probe on the moon. The goal is to explore the south pole region, which has a lot of potential for future surface development with the possibility of liquid ice in permanent cratered shadows and full-time sun to power solar chargers. From the perspective of launching new lunar exploration programs, it’s a big deal.

To call it a race perhaps over-sells it, however, as Russia won that competition ages ago when their Luna 24 probe safely landed all the way back in 1974. Yes, it has been 47 years since they last did it, but Russia has some of the top rocketry minds in the business and they know what they’re doing.

So it was a surprise when we learned that the Russian probe had an “emergency situation” in the final orbital approach and ultimately crashed. There’s no indication so far what actually caused the malfunction, and it’s possible we may never know. Maybe someone made a mistake, maybe it was a fluke, or just maybe something happened that nobody saw coming. Space is a harsh place.

Heartland Tri-State bank fails

Kansas bank failure reminds industry to be wary of scams, keep guard up — S&P Global

In late July, a small community bank in Kansas called Heartland Tri-State went belly-up and was quickly acquired by a competitor. I wish I could say that a failing bank is an isolated incident, but this is actually the 4th bank failure this year. Yikes.

While Heartland Tri-State is tiny compared to other notable failures like Silicon Valley Bank, what got my attention was the cause. Other famous recent bank failures resulted from risky accounting practices like investing in long term bonds that have to be sold at a big loss to meet short term customer needs, but Heartland Tri-State had no such issue. They were turning a profit, had “pristine” asset quality, and had strong capital levels. From a financial standpoint, they did everything right.

Rather than making poor business decisions, it turns out that the bank fell victim to a scam. It’s not clear yet what exactly happened. Maybe it was loan fraud or a cybersecurity issue. But regardless of the root cause, the important detail here is that nobody watching their healthy financial reports would have seen it coming.

Nobody is perfect — including experts

Look beyond the headlines of these three stories, and I believe they each share a common thread:

  1. Each situation involved the top minds in their industry.
  2. They potentially did everything right.
  3. They failed anyway for reasons beyond their control.

On the frontiers of science, failure is just part of the natural discovery process. You fall short 1000 times and keep trying until the next one hits. In risky situations like space travel, even the smartest literal rocket scientists in the world can’t foresee every possible failure outside of the lab. And in jobs like managing a regional bank, doing everything by the book still doesn’t guarantee success. The world is a complicated place with black swans lurking around every corner.

In short, expertise does not shield you from failure.

And yes, I believe that this maxim applies to investing just as well as it applies to materials science, space exploration, and banking.

Even if you’re highly experienced and believe you have it all figured out, there are still many ways that your financial plan can fail. The world is a chaotic place full of uncertainty that can’t be completely eliminated with all the knowledge you can possibly accumulate.

Perhaps you understand your own shortcomings and put your faith in an expert financial planner or fund manager to make the right decisions for you. Even if I’m a DIY type, I don’t have a problem with that at all and I truly believe that there are many talented people out there who are highly qualified to help out. But here’s the thing — even if they’re the best in the field it does not guarantee success.

So if the experts can’t be depended on, what are you supposed to do with your life savings? Just wing it?

Of course not!

I would argue that the true lesson here is not about tearing down the knowledge of experts but about building up your own wisdom and clarity of focus. Knowledge is a powerful thing. Seek it out. But what will happen and how will you react when the real world results do not work out the way you hope and expect?

Just as one example, the best financial experts today may predict the expected returns of your portfolio at current valuations are likely to meet your needs. But take a moment to study things like the Heat Map and consider the possibility that the experts are wrong and your own path may look like the deeper red scenarios on record. Prepare for that possibility now to adjust your Savings Rates accordingly, and your future will be that much more secure. While others may be caught off guard when measurable returns don’t meet expectations, you’ll cruise right along without worry.

Expertise can lead you towards the path to success, but your actions in the face of inevitable adversity are what ultimately determine the probability of reaching your destination. There are no guarantees in life, but resilient people don’t need them.

Are you an expert investor or a wise investor? Find the right mindset, and even if things don’t always go as planned they have a way of working out.

What was your greatest challenge and how did you handle it?

Join the conversation