Here's why I risk my life (when it makes sense)

Every time I climb a hairy peak like the Nose of El Capitan, go to a dangerous place like war-torn Ukraine, or make any investment, I think carefully about risk...

While I might appear at times to have a death wish, I assure you that I don't.

In both my personal life and as an investor, I'm willing to take risk – but I do many things to mitigate it.

At its core, successful long-term investing requires one to identify all risks... carefully, unemotionally, and accurately assess them... take steps to reduce or offset them... and, finally, gauge the balance between the downside and the upside. It's the proverbial risk-reward calculation.

I believe there are many similarities between the risk assessments I do in my personal/philanthropic life and when I'm wearing my investing hat. Let me explain why...

My Activities in Ukraine

Since the full-scale invasion four years ago, I've been helping with humanitarian efforts in Ukraine.

Whatever your politics, millions of civilians are suffering there. And for whatever reason, I feel compelled to help.

What started small with buying 50 EcoFlow batteries for $1,000 each has snowballed into raising a total of $20 million from my generous friends – most notably my college buddy Bill Ackman of Pershing Square.

But raising money is only the first – and, in some ways, easiest – step. Official programs are slow, bureaucratic, costly, and vulnerable to theft – and I won't tolerate a penny of my friends' donations going to waste.

So I have hand-delivered ambulances and other vehicles, a wide range of medical and supplies, and various types of "items" (use your imagination) to dozens of frontline units. I've traveled to Ukraine six times to do so, most recently last weekend.

Doing all of this entailed a fair degree of risk. I wasn't just in the safer areas of western Ukraine. I've spent a total of more than a month all along the eastern front from Odesa to Sumy. I've seen some terrible things: people who've lost their homes and loved ones and countless devastated villages like this one:

I've walked carefully to avoid mines and heard the buzz of enemy drones and the boom of artillery.

So why have I taken these risks? And what does it have to do with investing? Allow me to explain...

Excerpts From The Art of Playing Defense

As background, I want to share excerpts from my 2021 book, The Art of Playing Defense: How to Get Ahead by Not Falling Behind.

Longtime readers will be familiar with it. I wrote it for my daughters and to share the life lessons I've learned over the years on how to lead a happy, fulfilling, and successful life.

But rather than framing the book around positive things (work hard, be nice, have high integrity, etc.), I instead channeled one of my mentors: the late Charlie Munger.

He frequently said that, to solve difficult problems, "invert, always invert."

So I structured my book around avoiding five big calamities:

1. Loss of Reputation and/or Wealth

2. Loneliness and/or Suffering a Permanently Impaired Relationship With a Loved One

3. A Bad Marriage, Often Ending in Divorce (including the "12 Questions to Ask Before You Marry Someone" and then, once you've hopefully married the right person, how to maintain a healthy marriage)

4. Addiction and Abuse

5. The Death, Serious Injury, or Illness of Yourself or a Loved One

The last one especially relates to risk. As I wrote at the beginning of that chapter:

I've saved the biggest calamity for last. While deaths from illness, wars, crime, accidents, etc., have plunged over the centuries, millions of people still have their lives cut short or ruined by injury or illness, often in preventable ways.

In this chapter, I'd like to help you think about these risks, how to mitigate them, and how to think sensibly about which ones are worth taking.

For the first time, I'm making this chapter available to my readers for free. You can read it in its entirety right here.

In it, I discuss risks such as getting a deadly disease like cancer, having a serious accident, or simply having your body break down due to poor treatment: drugs, alcohol, smoking, lack of exercise, and/or inadequate nutrition.

The Importance of Humility

One of the lessons I share in my book applies to investing: the importance of humility.

It's okay to lack knowledge, experience, or skills in certain areas. But you must have the humility to understand this and find someone else to provide the expertise you lack. Hubris can be deadly...

For example, I'm a good climber and mountaineer. But I know I'm an amateur, so I always hire a professional guide before heading into the mountains.

Similarly, investors are well advised to pay for good advice – like from my team and me here at Stansberry Research – to help them fill out their knowledge base, make money, and avoid losses.

Sane Versus Insane Risks

It's also critical to differentiate between sane and insane risks. As I wrote in my book:

I love an adventure and am willing to take risks to have one. But there's a difference between sane and insane risks. In the former category, in my opinion, are rock climbing roped to a professional guide (for example, in June 2020, I climbed The Nose of El Capitan in Yosemite National Park), parachuting strapped to an instructor [which I've done twice], and bungee jumping [which I've never done – but it's on my bucket list!]. Yes, there's some risk, but if you're doing [it with a professional], it's minimal.

In the insane category are things like free soloing (what Alex Honnold did in the movie, Free Solo, climbing El Capitan without a rope), BASE jumping, wingsuit flying, and flying ultralight aircraft (which killed my friend, Walmart heir John Walton in 2005). No matter how good you are, the inherent risk of these activities is extreme, and an alarming percentage of participants end up dead.

Here are examples related to my trips to Ukraine...

I used to travel to the eastern part of the country to visit units I support. But in my past two visits – last July and last weekend – I stayed in Kyiv. That's because there are now so many Russian drones along the front, with a range extending 10 miles or more toward the rear, that I judge it too dangerous to go anywhere close.

Similarly, I've been offered the opportunity to get in an Abrams tank and go on a mission. I can't think of anything more fun... but there's a teeny, tiny little downside: I was warned that there was a 50% chance I would die. No thanks!

Buy Cheap Insurance

I also recommended in my book that if you can buy cheap insurance against a worst-case scenario, do so.

The single best investment I've ever seen in my career is buying credit default swaps ("CDS") in the lead-up to the global financial crisis. These derivatives insure against a debt default of the issuer – and one could buy them in 2006 and 2007 for 0.2% of the face value of the debt. That means if the issuer defaulted and there was no recovery, the owner of the CDS would make 500 times their money (0.2 cents on the dollar to 100 cents).

This trade was made famous in the book and movie, The Big Short – which features my old friend Michael Burry. Even if you weren't sure there was a housing/debt bubble, it made sense to buy insurance because it was so cheap.

My friend Bill Ackman made a similar trade using CDSs just before the pandemic hit in 2020. He turned $27 million into $2.6 billion – a 100-bagger – in a matter of weeks. (This Forbes article has the details.)

While I (sadly) missed these two trades as an investor, I did buy cheap insurance in my personal life...

When I first got into extreme adventures like climbing tall peaks and running 24-hour races (long before I went to Ukraine), I bought $10 million worth of life insurance. It cost a mere $8,000 annually and was fixed for 20 years. It has been a small price to pay to ensure my wife Susan and our children would never have to worry about money if something terrible happened to me.

It also provided me with a funny line...

I often hear something like this from concerned friends: "Isn't Susan worried about you going to Ukraine and doing things like climbing the Nose of El Capitan?"

My response usually goes like this: "Well, funny you should ask... Ever since I got a $10 million life-insurance policy, she says things like, 'You know, I hear Pokrovsk, Ukraine is lovely this time of year...' and, 'Boy, Alex Honnold [the world's most famous free-solo climber] is such a stud. I really admire men who don't climb with ropes – those are for wimps.'"

This joke makes me cry with laughter (but Susan doesn't find it quite as funny).

Avoid Being Dogmatic

I'm sure you've heard investors say, "I'll never invest in [Pick your poison: a heavily indebted company, airline stocks, IPOs, biotechs, emerging markets, crypto, etc.]. It's too risky."

Similarly, I hear people say, "You're crazy to go into a war zone."

This is simplistic thinking.

Even the greatest investor of all time, Berkshire Hathaway's (BRK-B) Warren Buffett, has been guilty of this...

How many billions of dollars did he fail to earn because he famously wouldn't even consider investing in any tech stock for most of his career? It wasn't until he became older and wiser that he bought IBM (IBM) (unsuccessfully) and Apple (AAPL) (spectacularly successfully).

The correct answer is that it depends.

For example, while the airline sector has, overall, cost investors billions of dollars in losses... some airlines have been great investments.

And during times of panic (most recently in March 2020 amid the pandemic), buying just about any airline stock was highly profitable.

This is true of any sector, so making blanket statements is silly.

Similarly, going to certain parts of Ukraine is perfectly safe. In fact, Kyiv is hit by Russian missiles and Shahed drones nearly every night, but I believe I'm safer there than in New York City... seriously.

That's because I do something very dangerous every day in my hometown: I ride my bike to get around.

There are so many cars, trucks, scooters, e-bikes, other bicycles, and pedestrians to dodge... I don't like to think about the number of near misses I've had.

And, as I detailed in my May 10, 2024 e-mail, I was even hit by a car – but the distracted driver got to his brakes in the nick of time and I escaped uninjured.

And I was actually at more risk of dying in July when I was visiting a friend in the famous resort town of St. Moritz, Switzerland than I was a few days earlier in Kyiv...

I set out on a big 12-mile hike to the top of a nearby mountain. It was warm and sunny at the base, so I was in shorts and a T-shirt (fortunately, I had put a thin jacket in my back pocket). But I had neglected to check the weather forecast.

You can probably guess where this story is going...

As I approached the summit, a nasty storm rolled in. The temperature quickly dropped to near freezing, hail and heavy rain pelted me, and, most dangerously, lightning bolts were cracking directly above me.

There was no shelter and I was nearing hypothermia. So I aborted my summit bid and made my way down as quickly as I could. But for 20 minutes, I feared being struck by lightning – and nobody would have found me for hours.

Here's a selfie I snapped, wondering whether it would be the last picture I ever took:

So, given the biking, hiking, and climbing I do, I don't think going to Ukraine for a few days a year is too risky.

Again, it doesn't make sense to say, "It's too dangerous to go to Ukraine." The correct answer is that it depends.

Avoid/Mitigate Risks

That said, in investing and in life, it's smart to avoid as many risks as you can while also not being dogmatic...

• I don't say, "I'll never invest in a heavily indebted company." Replace "never" with "rarely."
• I've never owned a cryptocurrency. But at the right price, if the negative sentiment were extreme (though I don't think we're anywhere near that today), I might take a flyer.
• I rarely speculate in early-stage, pre-revenue companies – but I love Joby Aviation (JOBY) at its current price.

There are many things I do to mitigate the risks related to my activities supporting Ukraine: I now don't venture near the front lines, I have a soldier from one of the units I support accompany and drive me everywhere, etc.

And I would never travel to Russia – or any country that might extradite me to there. While that may sound like the dogmatism I was just warning about... why take the chance, especially since I've already been to Russia and seen what I want to see (Red Square, etc.)?

(Frankly, I think the risk is very high for any American or European to go to Russia right now...)

However, it's trickier assessing what countries could conceivably extradite me to Russia...

For example, a couple years ago, I went on a humanitarian trip to Cuba – a longtime Russian ally.

I was worried, so a U.S. senator friend connected me with the head of security at the U.S. Embassy in Havana. He advised me that Cuba was highly unlikely to arrest and extradite me, even if Russia asked.

But he acknowledged that there was a tiny risk that if the Russian spies there learned of my presence in the country, they might hire some local criminals to kill me and make it look like a robbery.

As such, I hired the trusted security guy he recommended. Fortunately, the only thing he had to do was shoo away some panhandlers...

Take the Risk If the Reward Justifies It

I'm comfortable making certain details of my activities in Ukraine public because I think the likely upside more than offsets what I think is a small incremental risk.

It's important to me that as many people as possible learn about what I'm seeing there on the ground – and hear the stories of the brave Ukrainians who inspire me.

Overall, the point is simple...

Whether in investing or in life, you must carefully weigh – and do what you deem necessary to minimize – the risk factors. But after careful consideration, if the reward justifies it, take the risk.

Best regards,

Whitney

P.S. I welcome your feedback – send me an e-mail by clicking here.

P.P.S. Our offices are closed on Monday in observance of Presidents Day. Look for my next daily e-mail in your inbox on Tuesday, February 17. Enjoy the holiday!