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What Stockdale can teach us about finance.

March 3, 2012

Thank you for your service Admiral Stockdale.

Confronting reality is key to improving finances 

Admiral Jim Stockdale was the highest ranking U.S. military officer in the Hanoi Hilton prisoner of war camp during the Vietnam War. He was imprisoned from 1965 to 1973, during which time he was tortured more than 20 times, and was not given any prisoner’s rights.

Despite his personal anguish, he tried to help his fellow prisoners and country. He wrote letters home to his wife that contained secret information and devised an alphabet by tapping his feet to help prisoners with the isolation. He even beat himself so the North Vietnamese could not use him as an example to the world that they were treating prisoners well.

At the end of the war, Stockdale’s shoulders had been wrenched from their sockets, his legs were shattered, and his back was broken. After undergoing all of this, it he would in all likelihood be a broken man, but he was not.

After the war was over, he returned home and was eventually promoted to vice admiral. When he retired from the Navy, he became a fellow at Stanford in 1981 and spent the next two decades teaching and writing.

The International Committee for the Study of Victimization has done research on people who suffered serious adversity and survived. The research found out that some people were permanently dispirited, some returned to life as normal, and some were like Stockdale, who used the event as a defining moment to make them stronger.

Jim Collins, author of many business books, asked Stockdale about his experience. Collins asked him who did not make it out of captivity, to which Stockdale replied, “the optimists.” Stockdale went on to explain that the optimists believed they would be freed at any moment and when that didn’t happen, they became dispirited and gave up the will to live.

From Collins’ study on Stockdale, he came to find out that the ones who were able to use the horrendous experience as a defining moment were the ones who were able to retain faith that they would prevail in the end, regardless of the difficulties, and they could confront the most brutal facts of the current reality.

A personal financial situation or the country’s situation does not really compare to being tortured in a prisoner of war camp for eight years, but we still can learn from Stockdale. For those of you who are in a terrible financial situation, you have two choices: give up the fight and live a life of desperation; or, realize that your situation is extremely difficult, but vow to make things better even though it may take years or decades.

This is difficult, but no matter your situation, if you are reading this, I imagine your life is better than being in a torture camp.

If you choose the latter, you may not be able make your life incrementally better, depending on your age and financial situation, but at least you will help your family tree trend in a positive direction when it comes to future generations’ finances.

Our country needs to learn this lesson. As a country we are in a dire financial situation. Most of the country does believe that things will get better. Unfortunately, as a nation, we don’t want to confront the brutal facts of our current reality. We hear our candidates and opinion leaders say things like “we can grow our way out of our situation,” or “we can cut taxes and significantly increase our tax revenue,” or “we can just cut the extra spending on earmarks to get ourself out of our budget deficit.”

Others believe a different set of ideas that still fail to confront the brutal facts. Some believe we can keep all our entitlement programs such as Social Security, Medicaid and Medicare in place like they are now and still get out of our budget deficit. We are in tough shape, and to get out of it, we are going to have to make sacrifices and cuts in a wide variety of areas. I believe that as a country we will rise up to overcome this, but we definitely need a new mindset in how we do it.

Stockdale, who died in 2005, was one of the most highly decorated officers in the history of the Navy. When he learned that some other prisoners were being killed during their torture, he slashed his wrists to let the Vietnamese know that he preferred death to submission. This act led the Vietnamese to stop torturing the prisoners of war.

He loved his country so much he was willing to die for it. He lived in almost the worst conditions possible for eight years, and instead of being beaten down by it, he used it as the defining moment of his life. Surely, individuals in tough financial situations and our country could make some smaller, easier sacrifices than he did to help right our position.

Some of Stockdale’s quotes that he gave Jim Collins can be used as inspiration for all of us. Stockdale told him, “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. This is a very important lesson. 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.”

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