Building Conviction
Conviction refers to a state of being sure about a particular idea, principle, or viewpoint. Conviction isn’t a passive state; it is not a default state, rather it is an active process of commitment to one’s principles, decisions, and actions.
Conviction is different from belief. A belief is a passive state where we hold something to be true, very often a result of culture, education, or life experiences. It often does not impact behavior or motivate others. Examples: We believe that healthy eating is good or unethical behavior is bad - but it often doesn’t stop the indulgence.
Conviction, on the other hand, is an active viewpoint reached through an active thought process or by purposely choosing certain experiences. Since it is actively sought, it inspires action, is more resistant to external forces, and drives the commitment of our resources - time, intellect, wealth, etc.
Henry Ford's conviction that everybody should be able to own a car, or Steve Jobs' similar conviction about computers, or Elon’s similar ideas about Mars are examples of conviction that inspired great action. We can also see great wealth and movements created by people with a deep degree of conviction.
I think building conviction is a hard skill - most of us don’t really use it and live our life in a rather reactionary way to the opportunities and things right in front of us. It allows us to be an active participant in our lives, to choose purposefully and then actively dedicate ourselves to a path.
Conviction for a Better Life
We must build a conviction about a future state of the world in some dimension. And if we truly have conviction that the future state is inevitable or that the future state is highly desirable - then we can orient our actions to birth that reality and/or play for that reality.
Conviction is not fact. If everyone believes something and there is enough evidence to point to concrete data without much dispute - then it isn’t conviction but more of an absorption or observation of what is around us.
Conviction should ideally be unique and something about which many differing opinions and viewpoints exist. Moore’s law was a conviction when first proposed but today is just an observation.
Conviction should be an active pursuit to define a future state of the world.
Conviction in Financial Markets
“Wide diversification is only required when investors do not understand what they are doing...the whole secret of investment is to find places where it’s safe and wise to non-diversify. It’s just that simple. Diversification is for the know-nothing investor," Charlie Munger.
Contrary to popular belief, diversification is not a wealth creation strategy but a wealth preservation strategy. The biggest financial mavericks rose to fame because they worked hard to build conviction in a few bets and then concentrated their funds in those bets. Berkshire is almost 50% Apple and the top 5 companies account for 80%+ of the value of this $300 Billion+ fund. Bill Ackman made decisive but bold moves pre-pandemic due to his conviction around the impact of the pandemic on global markets before others observed it. The famous movie The Big Short captures the conviction of Michael Burry around the collapse of the American housing market.
We must learn to build conviction in a few investments and then boldly dedicate large portions of our net-worth into them. The reason we hesitate the most is because we haven’t usually done the work to build deep conviction.
Conviction Allows You to Get Back Up
"The greatest glory in living lies not in never falling, but in rising every time we fall." - Nelson Mandela
It is really difficult to do hard things or get back up and chase something with boldness if we haven’t built conviction. Because conviction building is an active exercise, it drives commitment to the cause we have undertaken, it forces us to persevere. It’s the conviction in one’s abilities and purpose that fosters the strength to bounce back from failures and continue striving towards success.
I’ve often pondered the undercurrents that drive us to act against the grain, to hold steadfast in the face of adversity. It's a kind of magic, really, how conviction can turn the ordinary into the extraordinary.
Conviction Inspires Others
“What important truth do very few people agree with you on?” - Peter Thiel
Most people are existing and most people don’t do the hard work required to build conviction in a few ideas. People who clearly articulate their convictions and consistently act in alignment with them inspire a following and are able to gather people. Conviction provides a clear and principled stand that guides decision-making and actions.
In some ways, conviction is more like a flame, ignited in one but capable of setting a whole forest ablaze.
Conclusion
Conviction, then, is more than a skill or a trait; it's a journey, a continuous process of aligning one's actions. It’s about building that conviction and having the fortitude to follow it, no matter how treacherous the path.
I am surprised how limited the literature is around building conviction and following it.
