In the book, Good to Great, the author Jim Collins states people fall into three different categories: 

  1. The Optimist (bound to be eventually dispirited) 
  2. The Realist (doom-sayer) 
  3. The Stockdale Paradox

 What Is The Stockdale Paradox

 Stockdale Paradox individuals are those that retain faith they will prevail in the end, regardless of the difficulties AND at the same time “CONFRONTING” the most brutal facts of their current reality, whatever they may be.

The Stockdale Paradox is named after Admiral Jim Stockdale who was the highest ranking US military officer imprisoned in Vietnam. He was held in the “Hanoi Hilton” and repeatedly tortured over 8 years. Collins describes going to lunch with Stockdale (can you imagine?) and trying to understand how he survived 8 years as a POW while so many died after just months in captivity.

Here’s how Stockdale put it. “I never lost faith in the end of the story. I never doubted not only that I would get out, but also that I would prevail in the end and turn the experience into the defining event of my life, which, in retrospect, I would not trade.”

“Who didn’t make it out”?

“The optimists. They were the ones who said ‘we’re going to be out by Christmas’. And, Christmas would come and Christmas would go. Then they’d say, ‘We’re going to be out by Easter.’ And Easter would come, and Easter would go. And then Thanksgiving, and then it would be Christmas again. Then they died of a broken heart.”

So, on the one hand it was about unswerving faith that one will ultimately prevail while on the other hand it’s about banishing all false hopes? As usual, the guy who lived it says it best.

“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.” 

Holding those two seemingly contradictory notions in his head simultaneously was the key to Stockdale surviving, even thriving, in his experience. And, I believe, it is a perfect summary of the mindset one must have to originate and live life successfully. You have to believe your vision will come to pass while simultaneously doing everything you can to make it happen. Yet, you can never let your belief and faith cloud your confrontation with reality.

The optimists are the hedge fund managers and the New Century’s while the Realist are the individuals/companies that will survive, yet will always be average.

Whether you are a consumer, originator, company, etc…, it’s your choice to choose the category in which you will operate.

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