The Stockdale Paradox is a concept popularized by author Jim Collins in his bestselling book “Good to Great.” Collins was referencing the incredible story of Admiral James Stockdale, whose story of perseverance through adversity as a POW in Vietnam’s infamous Hanoi Hilton is almost beyond comprehension.
If you read up on Admiral Stockdale, his story will blow your mind. His plane was shot down in the Vietnam War. He was badly injured when he was captured by the enemy. He was held as a prisoner for seven years—in solitary confinement for four years, in leg irons for two years, and physically tortured. Despite the horrific conditions, Stockdale organized a system of communication and helped a host of POWs survive captivity. He persevered and became a national hero.
Jim Collins interviewed Admiral Stockdale in preparation for the book, and as a result his important paradox was shared with the world. When asked how he got through it, Stockdale explained: “I never lost faith in the end of the story.” Furthermore, he believed that he would prevail and that the experience would be the defining event of his life. Truly an amazing human being!
When Collins pressed Stockdale about the characteristics of those who didn’t survive as a POW, his answer was immediate: “Oh that’s easy,” he said, “the optimists.” Collins was confused given Stockdale’s statement just minutes earlier. Stockdale explained, “The optimists were the ones who said, ‘We’re going to be out by Christmas,’ and Christmas would come and go. Then they would say, ‘We’re going to be out by Easter,’ and then Easter would come and go. And then Thanksgiving, and then Christmas again, and they died of a broken heart.”
Then Stockdale shared the critical lesson of the story which describes the paradox: “You must never confuse faith that you will prevail in the end – which you can never afford to lose – with the discipline to confront the most brutal facts of your current reality, whatever they might be.”
This lesson is very pertinent to our current situation with COVID-19, and our desire to reopen society. We must have faith that we will get through this and emerge victorious yet remain realistic about the difficulties and the changes that must take place before we can return to normal life.
We would all love to return to the office, for our kids to return to their sports teams, and for restaurants to overflow with patrons. We may wish it would happen in two weeks, or that the Giants would play home games within a month. Unfortunately, doing so risks a level of disappointment in the final outcome that could shake one’s faith.
This is also true for investors who hope that equity markets return to their pre-COVID highs as our economy opens and we return to “normal”. However, the Stockdale Paradox teaches us that we can’t put a timetable on difficult situations. We must be realistic and put one foot in front of the other with an unshakable faith that we can and will overcome.
Keep the faith … we are in this together!
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