Two roads diverged in a yellow wood,
And sorry I could not travel both
And be one traveler, long I stood
And looked down one as far as I could
To where it bent in the undergrowth;
Then took the other, as just as fair,
And having perhaps the better claim,
Because it was grassy and wanted wear;
Though as for that the passing there
Had worn them really about the same,
And both that morning equally lay
In leaves no step had trodden black.
Oh, I kept the first for another day!
Yet knowing how way leads on to way,
I doubted if I should ever come back.
I shall be telling this with a sigh
Somewhere ages and ages hence:
Two roads diverged in a wood, and I—
I took the one less traveled by,
And that has made all the difference.2
Nothing hides vast amounts of sweat like a cap and gown, and boy did I need that wardrobe over my shirt and tie 20 years ago this month at my high school graduation. Sitting in my seat preparing to deliver one of our class’ commencement speeches in front of almost 2,000 people – in which I failed to realize going in also came with the bright, hot lights of a front row seat – I anxiously stewed on stage reciting the last few lines of one of our great poems.
In the year 2000, googling “How do I write a graduation speech?” yielded fewer results than it does today. After much deliberation and family discussion, the writing thought process equation turned out to be as follows:
Two very different career paths being contemplated3 + Poem about roads diverging and needing to eventually pick one (perhaps not the popular or easy one) + Inspirational message of individualism = Good graduation speech!
Monday, June 26, 2000. I nailed it!4 I stopped sweating. Why am I telling this story?
First, I – and others long before and after me – apparently misinterpreted Frost’s message. David Orr, a columnist for the New York Times Book Review, seems to think so in his book published about the oft-cited poem.5
And almost everyone gets it wrong. This is the most remarkable thing about The Road Not Taken – not its immense popularity (which is remarkable enough), but the fact that it is popular for what seems to be the wrong reasons ...
Most readers consider The Road Not Taken to be a paean to triumphant self-assertion (“I took the one less traveled by”), but the literal meaning of the poem’s own lines seems completely at odds with this interpretation. The poem’s speaker tells us he “shall be telling,” at some point in the future, of how he took the road less traveled by, yet he has already admitted that the two paths “equally lay / In leaves” and “the passing there / Had worn them really about the same.” So the road he will later call less traveled is actually the road equally traveled. The two roads are interchangeable.
According to this reading, then, the speaker will be claiming “ages and ages hence” that his decision made “all the difference” only because this is the kind of claim we make when we want to comfort or blame ourselves by assuming that our current position is the product of our own choices (as opposed to what was chosen for us or allotted to us by chance). The poem isn’t a salute to can-do individualism; it’s a commentary on the self-deception we practice when constructing the story of our own lives.
Oops. Subject to interpretation and too much Shakespeare – the two things I remember about high school English class.
Secondly, and more on topic here, there is much to unpack in Frost’s poem about choices and decision making, humility and hubris, luck and skill in outcomes, and even the push-pull between happiness and regret. The speaker is all of us, living with imperfect information about what the future may look like, figuratively “traveling that road,” and then trying to rationalize expectations vs. reality. It is what we do as investors. Further, if behavioral swings – which seem to weigh on the poem’s speaker – are not kept in check, they can be distracting and harmful. I elaborate, below.
“Two roads diverged in a yellow wood… And sorry I could not travel both… And be one traveler, long I stood… And looked down as far as I could… To where it bent in the undergrowth”
The speaker is aware he/she is only “one traveler” and therefore cannot choose both roads at once. The comparison to investors is that we only have one portfolio. Investors can change course, but we don’t get a complete redo if the market is less good to us than those that came before or after. It’s why I’ve harped in recent memos on the importance of sequence risk6 and the challenges of relying on the median or average case spat out by portfolio simulations. How do we deal with that singular path? Importantly, the one portfolio can make many bets on a variety of future outcomes. Good portfolio construction says these bets should be as independent as possible to maximize the chances of being vaguely right, rather than precisely wrong. Investors should cast a wide net to take advantage of the breadth of opportunities available in the marketplace. Success equals breadth of opportunities plus skill to capitalize on them.
This approach of a selection of individual bets can also help alleviate the agony and stress of decision making, which exists because making one implicitly means not choosing whatever alternatives are available. In the case of investing, this does not necessarily have to be an “either or” paralysis if we strive for capital efficiency. Like the speaker in the poem, who stands there for a long time, perhaps too long, worried about the consequences, it would of course be easier if we knew where each road led. The speaker can only see so far out in the distance. It is unknown what lies ahead, and the uncertainty is uncomfortable. But Frost even hints the decision may have been an arbitrary one …
“Then took the other, as just as fair… And having perhaps the better claim… Because it was grassy and wanted wear... Though as for that the passing there… had worn them really about the same”
Orr makes the case the two roads are basically identical, as the other “just as fair… worn them really about the same.” Was there a reason for the speaker to choose one over the other? Did the quality of the decision change the longer the speaker stood there? In this case, it would seem the answer to both questions is no.
In a data-driven and media-obsessed society in which the amount of information trumps our ability to curate it all – and even then, that information may only be somewhat helpful – investors encounter a give and take between time and certainty. Some decisions need to be made quickly, for the longer one waits, the less the potential benefit. This can be seen in more volatile markets, such as acting on potentially mispriced assets.
In the case where time is less of a constraint, we still need to consider if the information available is going to evolve to the point that the quality of the decision improves with time. We sometimes assume we can’t act just because we don’t have full confidence in the right answer or prescription. We’re never going to be sure, and therefore, it would be a mistake to assume the quality of the decision made is poor as a result. One cannot demand certainty ever, especially in the challenging periods when one wants it the most.
“I shall be telling this with a sigh… Somewhere ages and ages hence… Two roads diverged in a wood, and I… I took the one less traveled by… And that has made all the difference.”
This last stanza is the poem’s most interesting and therefore, the most important to unpack and try to resolve, as Orr attempts in his review, which I summarize. By the speaker stating in the future he/she will be telling this story “with a sigh” – and the reader knowing the title of the poem is The Road Not Taken and not The Road Less Traveled, as it is often confused with – is the speaker hinting at potential regret in the decision made? In keeping with this specific interpretation, one may take for granted “And that has made all the difference” as being a good difference. Alternatively, is it perhaps a sign of hubris from the speaker, thinking one day he/she will be telling the story of picking one of two roads that frankly looked the same, called it “the one less traveled by,” and genuinely thought it made the (good) difference? Finally, if the speaker did in fact think he/she took the road that was less traveled, it goes against our makeup of not choosing the one more traveled; he/she went against the consensus, conforming choice.
I haven’t touched on the concept of what is called regret risk in previous memos, and it deserves proper attention. Investors should make decisions that lead to regret minimization so long as the various aspects of the decision aren’t in conflict with long-term investment objectives. An example is a choice investors may have considered during the peak of the market drawdown this past March: 1) adding to equities and then potentially seeing stocks continue to move lower or 2) not adding to equities right before a potential stock market rebound. Neither outcome would be desirable, one adding to losses and the other missing out on gains. By talking through the decision tree ex ante, investors build better habits, minimize biases, and ensure an awareness and understanding of trade-offs. The decision to act or not act should be done deliberately, and the regret minimization approach is a useful framing tool.
On the other hand, Orr contemplates whether or not the poem’s speaker is boasting of self-congratulation in thinking the road traveled was the deciding factor in the outcome realized. As mentioned in Mingelgreen Shoots: Luck and Skill In Investing, we underappreciate the role of luck or random events that play out over time. I wrote then (May 2018):
Given our human nature to be in control of outcomes, this rationalization is not surprising. However, this can give a false sense of confidence in predicting future outcomes and is why I find it necessary to have a healthy dose of humility in positioning for long-term investment success.
A slightly different school of thought – although related – is to attempt to minimize the role of luck, both good and bad, in outcomes. Luck is always going to be a factor, but how do we effectively minimize this error term that needs to be explained away? Good luck can only mask a flawed process for so long, and while we enjoy the benefits when it turns in our favor, we’d rather move away from luck’s left and right-tails. We can’t submit to the illusion of control7 fallacy, so instead we focus on the things we have influence over, such as engaging multiple perspectives instead of a singular house view, minimizing behavioral biases, tweaking our process over time as we learn from experiences (both short- and long-term feedback loops), helping investors manage – not avoid – risk, and seeking more persistent edges. We can’t get rid of risk or luck, but we can try to manage them together.
I’d be remiss not to comment on the speaker taking the road “less traveled by,” if we are to take him/her literally. Taking a non-consensus or different approach is behaviorally uncomfortable. Why do too many equity managers masquerade as high-cost, index-like strategies? They try to be just different enough to matter – or at least they tell their story that way – but not different enough in practice to get themselves in trouble with their clients. Therefore, they limit return dispersion vs. the comparative benchmark. To get outsized relative returns, one has to be different and right. But failing when taking a non-consensus or different approach tends to have harsh ramifications – leading to significant regret – as compared to failing when conforming to others. Further, being different and right is usually chalked up to either a “go-it-alone” mentality or good luck, usually the latter, even if one tried to minimize luck’s impact as outcomes are realized. In short, taking a road less traveled by is a lonely proposition, even if rational from an investment standpoint.
I can only hope on that June evening 20 years ago some of my classmates listened, even if I was just another 17 year old pondering the various metaphorical roads at our feet and life’s potential challenges ahead. Today, we can all benefit from a whole lot more listening and thinking (and perhaps a whole lot less talking8). The first half of 2020 has been heavy and tough on our society for many obvious reasons. In some ways, we’ve seen the best of humanity, and in other ways, the worst. Yet, I’m comforted in knowing the next generation is intelligent, spirited, connected, innovative, and motivated. I’m sure there are some inspirational graduation speeches being told these days worth our listen.
Dare I tweak Mr. Frost’s poem in closing, looking ahead to better times:
I took the one less traveled by, And I hope that has made all the a difference.
Jason Mingelgreen, CFA
1 The term “green shoots” in the investment vernacular still refers to the development of improving or positive economic data in an otherwise challenging period. As used above, the term is a play on words and is not meant to indicate investment results or the state of the market.
2 The Road Not Taken, Robert Frost.
3 I studied Finance at Syracuse’s Whitman School of Management and Broadcast Journalism at Syracuse’s S.I. Newhouse School of Public Communications.
4 My recollection. VHS evidence hopefully destroyed.
5 The Road Not Taken: Finding America in the Poem Everyone Loves and Almost Everyone Gets Wrong. David Orr, 2016. Note, I take some solace in that this book was published well after the year 2000.
6 Sequence risk refers to the order and magnitude of returns impacting the longevity of capital.
7 The tendency for people to overestimate their ability to control events and outcomes, of which they have little to no influence over.
8 Yes, I do realize the irony here of me “talking” by publishing this memo.
Past performance is no guarantee of future results.
Asset allocation and diversification do not ensure a profit and may not protect against loss.