My introduction to the bounce-back rate.

In my 20s, I launched, expanded, and faced failures in multiple companies. Early on, I became intrigued by the concept of “bounce-back rate.” Whether in business meetings or discussions with mentors, the term was frequently used. When a prominent entrepreneur or business figure in the community encountered a setback, the common question was, “Did they bounce back?” or “They never bounced back” or “They will be fine and bounce back.”

🥊 In the business world, a “hit” simply signifies when something goes wrong, a failure, setback, or disappointment. A punch in the face. In Australia, we might say “S*** hit the fan” to vividly illustrate the mess. It was this concept of “Bounce back” that helped me navigate through numerous failures during my early experiences in the business realm.

Disappointment, failure, setback after setback are normal for an entrepreneur developing startups. Over time, I toughened up, although my resilience waned the longer I remained in the game. This is when I first recognised the idea of utilising the Bounce-Back Rate to help me through challenging times.

Whenever I encountered a challenge and stumbled, I’d think “I need to bounce back fast here.” If the failure was particularly tough, I’d allow myself a little more time to wallow in grief and “feel sorry for poor little Mitch,” and then I would immediately resolve to bounce back. In an instant, I’d rebound and get back in the fight.

What exactly is the bounce-back rate?

The power of compounding works in both positive and negative ways across different aspects of life. We often learn about compounding in terms of wealth creation, but it also applies to habits, knowledge, health, fitness, relationships, and anything else that benefits from consistent effort over time.

When it comes to negativity, compounding can magnify negative emotions, reactions, failures, and the feelings that linger after setbacks. Some entrepreneurs have been completely derailed because they couldn’t recover from obstacles. It’s not just about financial ruin; it’s also about the emotional toll of facing failures and disappointments. This can lead to self-pity, depression, and a loss of confidence, causing talented and successful individuals to fall off track and struggle to regain their momentum.

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 It’s not about how hard you hit, but about how hard you can get hit and keep moving forward.

Rocky Balboa

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Bouncing back from setbacks is crucial. It’s about understanding the situation, reflecting on it, accepting the reality, and then moving forward. In business, it’s the ability to not let a setback derail the entire plan, but to feel the loss, regroup, and then stick to the strategy and keep moving forward.

Resilience is what allowed me to keep building my companies despite facing numerous setbacks. The bounce-back rate is a time-bound concept. Some setbacks require time to process, similar to grieving, and can’t be simply brushed off. But the key is to keep looking forward and not let challenges deflate you, drain your energy, or dim your light in life.

My experiences with the Bounce-Back rate.

Personally, I found that I had a quick bounce-back rate early in my journey. I was able to rebound from setbacks, failures, and negative emotions almost instantly. Whether it was a financial loss, a failed transaction, legal issues, unsuccessful launches, customer disputes, contract disputes, or concerns about raising capital, I could reflect, feel bad for a short while, and then quickly pull myself together to start anew.

🏋️‍♂️ However, as time passed, I noticed that my ability to bounce back diminished. Just like physical fitness requires “Recovery Time”, the bounce-back rate can be related to mental recovery time. It’s crucial in various aspects of life, such as marriage and raising children.

The faster one can recover and collect themselves, the better they become at persevering and growing resilient over time. I do believe it’s important to express emotions and allow oneself to feel disappointed or feel down. After going through those emotions, it’s essential to regain composure and get back into the fight ⚔️.

What does this have to do with Investing?

Now, onto the topic of investing. The bounce-back rate has been even more important in my investing journey. We all suffer losses, a failed investment thesis, disappointing investment runs, missed opportunities, and a host of other challenges that investing brings.

Investing is incredibly challenging because the feedback loop is often long and unknown until the thesis or track record becomes evident. It is common in the investing world that when people take a loss or get wiped out during a market downturn, oftentimes, they never return to the stock market. Sometimes it takes so long to get back into the market and the loss of confidence wanes on the overall returns.

I believe the bounce-back rate is incredibly important for investors. How fast you can recover and get back to your investment strategy is crucial. Investing is not a game where you can play under emotional stress or the feelings of self-pity, as it can lead to even further losses by making poorer decisions.

Investing should be factual and unemotional, as investing is mostly psychology. Investors need to absorb losses or things not going to plan. In the investing world, plans often don’t go right. It’s always changing, evolving, and there are so many unknowns. Investors cannot dwell on what went wrong for too long. It does impact future progress.

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“In the investing world, plans often don’t go right”

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It’s normal and okay to feel deflated, but it’s not okay to stay there, especially when trying to make important financial decisions. I believe it is important to reflect on losses or failed opportunities. Reflect on what went wrong, and work through the process of how you got to this position. Try to make sense of it and find ways to improve and close those gaps in your investment process, or valuation or portfolio construction.

I find it helpful to bounce back the moment I start analysing what went wrong, even if it was a random black swan. How was I overexposed, or how could I position myself better in the future?

I’ve never seen an investor make successful sound decisions from a place of disappointment, self-pity, or depression. The moment that loss or setback starts to fester, it spreads into other areas.

You cannot beat yourself up too long. I’ve been there, I’m not standing on the sidelines just blurting out ideas I’ve never experienced. I lost $50,000 in two days early in my journey as I failed to understand and close out a position.

It took months for me to accept, months of self-pity, months of being out of the game, and so many missed opportunities because this feeling and setback derailed my entire plan. I was not able to bounce back fast on this one. It flowed into other areas of my portfolio because I was not attentive, and my head wasn’t in the game.

Then I reflected, went through the motions, journaled about it, and I eventually bounced back. The bounce-back rate was too long, though.

How to improve your Bounce-Back Rate?

I believe there are a few ways to help you bounce back faster, and this is the whole premise of the blog really. Have a plan, know what you are setting out to do, know what you are trying to achieve, and stay the course. That is the short answer.

Having a well-thought-out investment strategy and philosophy is the first step. Reading and understanding about investment psychology and the impact our behaviour and emotions have is equally important. If we are aware of the impact the mind has and how we are our worst enemy, you are better prepared for the journey.

Having a long-term mindset, not just a horizon, is important. As I am long-term focused, I stretch out these failures and think over the long term I will be fine. It is just a small stone that tripped me up in a much bigger path. The Stoic approach is important here. If it is not in your control, then why waste time and energy feeling bad about it?

If it was in your control, then you need to go to work to close this gap.

• What went wrong?
• What part of the process failed?
• Where does it need improving?
• Do you need to review your asset allocation?
• What could I have done differently?

Now, one of the keys to recovering from a loss or failed investment comes back to risk management. After some heavy losses, I changed my exposure to any one investment. I don’t make investments that expose me to being wiped out. I’m never overexposed to areas that lead to permanent capital loss. So, every position, although they may grow outsized, is not detrimental to my survival. Each failure or loss is manageable (although it tastes bad), it’s still manageable.

I know I can regain this back over long-time horizons. This is important to allow my mind to bounce back faster as I know it’s recoverable.

If you have a strategy, and a sound investment process, you can stay the course long-term. When failure sets in you can go back to your plan, goals, and reflect.

An investment journal is important as well. Write down losses, missed opportunities, feelings, and emotions so you can draw back on your experiences and mindset at the time of other challenges. You will be amazed at how much inspiration and words you can gather from yourself based on navigating past challenges.

In Summary…

The concept of the bounce-back rate is metaphorical and relates to recovery time, but it should be an important consideration for investors. How quickly you bounce back can significantly impact your long-term results and wealth creation.

Resilience is the secret weapon of all successful long-term investors. Among many other virtues like patience and wisdom, they were resilient. They kept on going, bouncing back quickly instead of staying at the bottom or wallowing in self-pity.

Pick yourself up, get back to the plan. It’s difficult to measure the financial impact of how you react to setbacks, but one thing is certain: reducing the bounce-back rate has been a major contributor to my own wealth creation.

Recover fast and don’t let short-term setbacks derail long-term objectives.

I’ve faced a couple of situations in my business and investing life that could have derailed everything. However, I attribute overcoming these challenges to my understanding and use of the bounce-back rate. One day, I found myself feeling sorry for myself in my home gym (a shed) after a recent failure and a poor investment that I was sure would be successful. After a few days of self-pity, the idea of bouncing back came to mind. I asked myself, “I wonder how long it would take to bounce back from this,” and then I thought, “Well, why not bounce back right now?”

So, I returned to the office, turned on my laptop, opened my watchlist, and immediately started looking for opportunities, evaluating companies, and rebalancing my portfolio. The results after this were exceptional and made the initial setback look insignificant.

What is your bounce-back method, and how can you improve your bounce-back rate after a setback?