You may have heard of Dwight Eisenhower, who served as Supreme Commander of the Allied Expeditionary Forces in Europe during the Second World War, including being in charge of the D Day landings. Later, we elected him President of the US for two consecutive times (1953-1961). What history don´t tell about the 34th President is his reputation among his political opponents of being, at least, not very bright, and prone to saying dumb things. It’s hard to believe, given all he accomplished during his career, but it’s true. Somewhere in his papers he wrote something like this: “Plans are worthless, but planning is everything”. Apparently this was initially understood as a typical self-contradictory Eisenhowerism. However, this quote is full of significance: Eisenhower’s point is that the real value of making a plan does not reside in having such a plan and strictly follow it, but the capabilities and knowledge gained during the planning process. In fact, one’s plan/strategy hardly ever work out, other than in the simplest situation.
Clausewitz (Prussian general and military theorist) stated “No plan survives first contact with the enemy”. Market is the same; doesn´t matter how good your plan/strategy is, it will never be able to exactly predict the market and how it will react. Instead, the value of making a plan is in the thinking that goes into making it, not in the plan itself. Planning process forces you deeply think about your objective, the way you will accomplish it, time required, etc. This even helps you to realize that your original goals may be wrong, and need to be redefined. Throughout the investment process, lot of assets and strategies need to be analyzed, understanding their business plans, validating their hypothesis and finally investing just in those that better fit with the profitability-risk binomial desired. The effort and time dedicated into producing a plan/strategy is not in vain, as it demands you to exhaustive explore different options and alternatives and the risks associated, the reasons to reject ones and adopt others, and provides you of a great perspective. Forcing yourself to go through the thinking process that planning requires, takes you to discover, develop and launch you own ideas. Being creative and original, looking for you own ways and opportunities where others didn´t explore yet, you will be able to see what others don´t. If the market is focused on an asset that looked attractive, you probably should not invest on it or, if you do it, should do it with grater rigor and accuracy, as it may be too late to find the price cheap. Last but not least, would like to include a paragraph about contingency planning. Even considering you have the best skills, when plans fail or circumstances change, you better have a contingency plan as you may not be able to fast elaborate a new one from scratch. Those alternatives previously discarded can now work.
Eisenhower was wright, planning is everything, especially contingency planning. We must be prepared for any risk that may arise, and be able to modify our plan accordingly. Other curious thing that history doesn´t use to tell about him is that he elaborated an alternative plan in case the Allied failed at D Day, that included a speech with the reasons of the defeat and offering his resignation.