(by Tisa Silver, MBA, author, professor, non-profit founder, goddess)
As I watched President Obama speak to our nation's youth this afternoon, I was moved by his message, and I am so excited about what our children are capable of!
Many of the President's statements jumped out at me, but the one I zoomed in on was "where you are right now doesn't have to determine where you end up." I totally identify, and I actually wrote about it in The Time Value of Life.
Each chapter of the book has a finance lesson and a life lesson. Please read, comment and feel free to pass along the contents of Chapter 16: The Past Does Not Dictate The Future.
Just because something happened before, does not mean that it will happen again. The past may or may not repeat itself, but when a pattern is established, it would be reasonable to expect the trend to continue. Ultimately, it really depends on what trend we are talking about, but in the stock market, it can be dangerous to expect anything.
Stock prices move as a result of information and expectations. If good or bad news is released and it was expected, you may not see much of a price change. When the news was not expected, you will more than likely see a larger reaction by investors.
When you are a company with a good track record, investors come to expect good results, but conditions may change for the worse, and sometimes the company does not control those conditions. The company’s executives may publicly discuss their positive expectations, only to later disappoint investors if the company fails to meet those expectations.
This is one reason why, in the investing world, you will come across warnings about forward-looking statements. All publicly traded companies have a disclaimer regarding such statements included in their financial statements. Here’s an example of a disclaimer regarding forward-looking statements:
Statements that are not facts, but are based on the company’s beliefs or expectations, are forward looking statements. The statements are based on forecasts and projections at the time the company made the original statement, and you should not place undue reliance on them.
Forward-looking statements involve risks and uncertainties, and the company cautions you that a number of factors could cause actual results to differ materially from those contained in any such forward-looking statement.
Take a look at the key words: “beliefs,” “expectations,” “risks,” and “uncertainties.” When I read them, I perceived them to be defensive and negative. This is basically telling people to invest at their own risk, and not to take anything that the company has said or done in the past as a guarantee of things to come.
When it comes to life, I know people who have made a lot of positive forward-looking statements and then failed to live up to them. I also know a lot of people who have set low expectations for themselves and then surpassed them. The truth in either case is that the past does not have to be an indicator of the future. Often times it is, granted, but it does not have to be.
Life is full of beliefs, expectations, risks, and uncertainties, but at any point, each of us can choose to handle them differently. Just because you have been slacking on the job all year doesn’t mean you can’t try your best today. If you have a habit of being delinquent with bills, you can pay the next one on time. If there is something you have been putting off for a long time, you can start it right now. If you have been careless about how you spend your time, take a few extra minutes now to save yourself a lot of time and energy later.
From Average Student to “Excellent” Teacher
I began teaching finance at my alma mater with an introductory level course called Principles of Finance. I had taken the course five years earlier and earned a “B.” I could have done better, but I was going through a tough time that semester.
During the previous semester, my doctor had found a tumor. I took a few days off from my spring classes for doctors’ appointments. I went to my doctor and then to a specialist. I didn’t care for that specialist’s attitude, so I went to another specialist and chose her to perform my surgery. While my classmates and friends were focused on schoolwork, I was preoccupied with blood work and trying to figure out how to make up work. The day after my surgery, I returned to campus and started summer school.
My grades turned out well enough, given the circumstances. Then, I spent the rest of the summer working in Washington, DC. By the time the fall semester arrived, I was ready to go back to school. Halfway through the semester, I burned out. I was tired all the time and I was extremely moody. My school work suffered, and I decided to tell my professors what was going on with me. Fortunately, most of them were very nice about it and were willing to work with me. My finance professor was particularly flexible with me and later became a mentor. (After my first semester of teaching the Principles course, I received overwhelmingly positive evaluations, and much of that is due to what I learned from my mentor, the professor.)
After completing the 300-level finance courses, everyone had to take Finance 407—Securities Analysis. We all dreaded that class. I tried very hard, but I just didn’t know how to study, and at that time, not many people were holding study groups.
Throughout the semester, I improved on each exam, but never managed to score more than a “B-.” The fact that steady improvement led me to a “B-” should be an indication of how low my grades were when I started out. The professor I had was excellent, but he didn’t believe in the plus and minus system, so I ended up with a “C” in the course.
In my second semester of teaching, I was asked to teach Securities Analysis. I must admit I was a little apprehensive. I knew I could do it, but I knew it was totally different from the lower level course. What’s funny is that I taught much of the 400-level material to my 300-level students. The students I had taught in 311 later went into 407 feeling ahead of many of their counterparts. I found this quite ironic, given the fact that I had the least amount of education and experience in the department.
At the end of my second full-time year, I received the Student Choice Award for Excellence in Undergraduate Teaching. Who would have thought that the “C” student would end up winning a teaching award and a pleasant bonus for her efforts!
I am living proof! Past performance does not have to be an accurate predictor of the future.
For more information on The Time Value of Life, visit tisasilver.com.
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